Shell: World’s biggest gas-to-liquids plant to start soon

• World’s largest gas-to-liquids project to start in weeks
• Developed by Shell, Qatar Petroleum at a cost of $18-$19 b
• Plant to produce fuels such as diesel, kerosene, naphtha

KUALA LUMPUR (Reuters): Royal Dutch Shell expects oil product output at its joint venture gas-to-liquids project in Qatar to start in weeks, bringing online the world’s biggest facility built at a cost of about $18-$19 billion.

“It’s very exciting because it’s a huge start-up,” Vice President for Strategy Dick Benschop told reporters at an industry event in the Malaysian capital. “The first crude is there and the product will be there soon.”

The project is Shell’s second. Natural gas will account for half of Shell’s output this year as more companies tap this resource to meet rising energy demand as oil becomes more difficult and expensive to produce.

Plant operator Shell said in March it had started output from natural gas wells offshore, allowing the first sour gas to flow through a subsea pipeline into the giant GTL plant onshore.

“Every production is commercial, but there will be a ramp-up,” Benschop said.

Pearl, a joint development by Qatar Petroleum and Shell, will process about 3 billion barrels-of-oil-equivalent over its lifetime from the huge North Field stretching from the Qatari coast into the Gulf.

The plant will produce 140,000 barrels per day (bpd) of oil products such as diesel, kerosene, lubricant oils, naphtha and paraffin.

The Pearl GTL plant should come on line by the end of the year and reach full capacity in the first quarter of 2012, Tasweeq’s CEO told Reuters on Sunday.

To cope with demand

In the long run, energy supply will struggle to keep up with rising demand as the global population increases and gets more prosperous, Benschop said.

The unrest in the Middle East and North Africa have put energy security in the spotlight while Japan’s worst nuclear crisis has cast doubts on future projects.

Consumers will have to use more gas and renewables than before, he said.

Increasing gas supplies from unconventional sources could encourage demand to rise to levels exceeding coal by 2030 and coming close to oil by 2035 if certain conditions are met, the International Energy Agency (IEA) said.

“A city of 1 million people is going to be created every week,” Benschop said.

“You have to run to be able to stand still” in order to meet the demand, he said, adding that the days of “easy oil” are over as oil becomes more difficult to access and gets more expensive.

New fields would require oil prices to be at $70-$80 a barrel to be viable, he said.

Shell’s North Sabah fields in Malaysia faces a natural decline of about 5 percent a year, a rate which is “much better” than the country’s industry standard, Anuar Taib, Shell Malaysia’s chairman, said.

Together with Malaysia’s state-owned Petronas , the company is looking at ways to implement enhanced oil recovery techniques to improve or maintain output at its fields in the country, he said.



Expand renewables



Shell is also developing its renewables portfolio, having started ethanol production in Brazil for the first time last week.

The energy company and Brazil’s largest sugar and ethanol company Cosan started their new joint venture Raizen to produce the biofuel.

It takes 30 years for a new form of energy to be material, that is, to account for 1-2 percent of the total energy mix, Benschop said.

“We’re almost there for wind now,” he said, adding that biofuels are also reaching the 1 percent mark.