Posted by John Donovan: 8 Feb 24
In a plot twist that no one saw coming (except maybe everyone), Shell has admitted that its petrochemical plant is more of a money pit than a cash cow, with costs ballooning to a comically oversized $14 billion. That’s right, folks – in what can only be described as a financial facepalm, Shell has managed to overshoot its initial guesstimate by a mere 130%, proving that when it comes to budget management, they’re as reliable as a chocolate teapot.
Remember those days when Shell, tight-lipped and coy, hinted at a quaint $6 billion for the construction? Well, surprise! The actual price tag has the company sheepishly admitting on their fourth-quarter earnings call that they’ve outdone themselves, soaring past not just their own fairy-tale figures but also eclipsing the $10 billion that industry watchdogs IEEFA and IHS dared to estimate.
IEEFA, not missing a beat to say “I told you so,” has been vocal about how this plant was essentially a bad idea on stilts. Citing reasons like the equivalent of economic hara-kiri, an impending recycling revolution, and good old-fashioned competition, they’ve outlined why this project should’ve been left on the drawing board. Plastics News, watching from the sidelines, couldn’t help but note that Shell’s now got a bigger mountain to climb to make any sort of return on this environmental boo-boo.
In an attempt to paint a silver lining on this cloud of smog, Shell announced a future of “small and replicable is beautiful,” which sounds a lot like someone who’s just learned a hard lesson about not putting all their eggs in one basket. Especially if that basket is a giant, polluting, and financially dubious petrochemical plant. They’re now hinting that the era of going big on fossil fuels is as outdated as a floppy disk, something that Standard and Poor’s had already hinted at with all the subtlety of a sledgehammer back in October 2021.
Oh, and the plant’s operational journey? Let’s just say it’s been more ‘A Series of Unfortunate Events’ than a smooth sail. With a rap sheet that includes air permit violations and emissions overshoots that would make any environmentalist’s hair stand on end, the plant also took a little time-out in 2023 to think about what it’s done. And yes, there’s still a part of it that’s taking its sweet time to come online, with full operations now expected when the flowers bloom in spring.
Shell’s dream of pocketing between $1 billion to $1.5 billion in profits from this venture has been pushed back to a “maybe by 2025-26” scenario, adding just the right touch of economic uncertainty to the mix. This revelation serves as the cherry on top of a growing industry trend where construction costs are spiralling out of control, much like a certain company’s grasp on fiscal responsibility.
So, here’s to Shell’s latest adventure in financial forecasting and environmental stewardship – a reminder that sometimes, even giants can stumble, especially when they’re wearing oil-slicked boots.
