Royal Dutch Shell Plc  .com Rotating Header Image

UpstreamOnline: Pearl GTL set for big payback

By Damon Evans

The $18 billion Shell-led Pearl gas-to-liquids plant on the eastern coast of Qatar is set to reap the rewards of the current high oil price climate and is likely to have a payback period of as little as four years due burgeoning GTL economics.

The Pearl plant will be the largest GTL plant in the world when it starts up in 2010 and will produce around 3 billion barrels of oil equivalent well head gas over the life of the project, said Shell’s managing director of Pearl GTL, Andy Brown, at the GasTech conference today.

Spiraling costs have taken the project’s price tag to between $12 billion and $18 billion from an original budget of $5 billion according to Shell, but some industry observers say the outfit will be lucky to get change from $20 billion, said Alexander Forbes, director of Forbes Communications in a seminar at GasTech today.

Pearl’s GTL plant could bring home $4.5 billion a year based on $50 a barrel oil prices, meaning the payback period of the project would be around four years, said Forbes.

“The attractiveness of these projects (GTL) is increasing in the high oil price environment and as long as the technology can be made to work,” added Forbes.

Shell’s mega GTL project will have a development cost of between $4 and $6 per boe, said Brown.

Assuming the project has a capital expenditure value of $15 billion and based on an oil price of $65 per barrel, Pearl has a net present value of $27 billion, Forbes quoted energy consultancy Wood Makenzie as saying.

Forbes added GTL economics look strong due to high oil prices and growing demand for cleaner fuels.

Pearl GTL is comprised of upstream gas production facilities that will produce 1.6 million cubic feet of gas from its north field as well as an onshore GTL plant that will produce 140,000 barrels per day of high quality GTL fuels and products along with 120,000 boe of condensate, liquefied petroleum and ethane.

US contractor KBR and Japan’s JGC have formed a joint venture to carry out the overall project management, plus engineering, procurement and construction management for the GTL and utilities units. A host of other outfits, including J Ray McDermott’s and Chicago Bridge & Iron, will be performing lump sum implementation contracts.

In terms of physical construction, Pearl is a mega undertaking, said KBR’s project director, Graham Taylor.

He added, 500,000 cubic metres of concrete, 150,000 tons of structural steel, 100,000 tons of piping and 100,000 tons of equipment needs to go up.

Currently there are 20,000 workers on the ground as site preparation nears completion, but this figure is set to peak at 35,000 men and over 200 million man hours will be needed to build the mammoth plant.

The first GTL train is due to start up around the end of the decade, followed by the second train a year later. Each train will have eight hydrocarbon process strings, 3000 commissionable systems and over 10,000 containment systems.

——————————————————————————–
11 March 2008 05:35 GMT  | last updated: 11 March 2008 05:57 GMT

http://www.upstreamonline.com/incoming/article150373.ece

royaldutchshellplc.com and its also non-profit sister websites royaldutchshellgroup.com, shellenergy.website, shellnazihistory.com, royaldutchshell.website, johndonovan.website, shellnews.net and shell2004.com are all owned by John Donovan. There is also a Wikipedia article.

1 Comment on “UpstreamOnline: Pearl GTL set for big payback”

  1. #1 Goblok
    on Mar 11th, 2008 at 06:28

    Paddy what do you say to this … great investment … have you put your money into RDS shares now?

Leave a Comment

%d bloggers like this: