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Reuters: Shell sticks to $18 bln Qatar plant price tag

Thu Feb 22, 2007 9:53 AM GMT
By Odai Sirri

RAS LAFFAN (Reuters) – Royal Dutch Shell said on Thursday it was sticking to its maximum cost estimate of $18 billion (9.2 billion pounds) for its Pearl superclean fuel plant in Qatar after a local official said the cost would exceed $20 billion.

“We stick to our guidance of $4 to $6 per barrel, and for total output of 3 billion barrels of oil equivalent,” Shell’s Chief Executive Jeroen van der Veer told Reuters at a ceremony to break ground at the 140,000 barrels per day (bpd) gas-to-liquids project.

Van der Veer said that the estimate included inflation and building costs for the plant at Ras Laffan.

A Qatari official told Reuters on Wednesday the plant would cost over £20 billion, up from an original budget of $5 billion and above Shell’s highest estimate.

Rising prices for materials such as steel and shortages of manpower are boosting costs in the oil and gas industry, which is straining to bring on new capacity to meet rapid growth in global energy demand.

Exxon Mobil pulled out of a similar project in Qatar on Tuesday because of spiralling costs, and some analysts have doubted the wisdom of Shell’s Pearl project.

Shell is pushing ahead and maintains that Pearl will be profitable. The ceremony on Thursday was a formality — Shell began construction in the third quarter last year, and has already awarded $10 billion of contracts that cover all the major engineering, procurement and construction work.

Qatar’s Energy Minister Abdullah al-Attiyah earlier this week described GTL technology as expensive and very technical.

Van der Veer said Shell’s GTL technology was proven through its use at a smaller 12,000 bpd plant in Malaysia.

GTL plants process gas into clean oil products such as low sulphur diesel, demand for which is growing as governments worldwide impose tougher emissions standards.

Pearl is central to Shell’s efforts to boost output after it ceded control of the Sakhalin-2 oil and gas project in Russia’s far east to state-controlled Gazprom last year.

Pearl will be fed with gas from Qatar’s North Field, the largest pure, or non-associated, gas field in the world. The gas field development will produce 1.6 billion cubic feet of gas per day and around 120,000 barrels of oil equivalent of condensate, liquefied petroleum gas and ethane, Shell said.

© Reuters 2007. All rights reserved.

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