Week of February 2, 2004
  Snapshot from the Field
Sir Philip Watts (left) with Abdullah Hamad Al-Attiyah
Royal/Dutch Shell Chairman Sir Philip Watts (left) shakes hands with Qatar Energy Minister Abdullah Hamad Al-Attiyah after the two signed the agreement for Shell's $5-billion plant.
Shell Signs on to Build $5B Gas-to-Liquid Plant in Qatar

by JACK LYNE, Site Selection Executive Editor of Interactive Publishing

RAS LAFFAN, Qatar – For Shell (www.shell.com), the US$5-billion project is a big-time play for the pole position in a green revolution in automotive transportation. For Qatar (www.mofa.gov.qa), on the other hand, it's part of an effort to revolutionize its economy.
        Put those two together, and you get a giant Middle Eastern plant that will rank as the world's largest gas-to-liquid (GTL) operation. Shell will build the plant in the state-owned Ras Laffan Industrial City (www.raslaffan.com), which lies 50 miles (80 kilometers) north of Doha, Qatar's capital city.
        "It heralds the dawn of a new industry," Malcolm Brinded, CEO of Shell's natural-gas and power division, said of the project.
        Royal/Dutch Shell Chairman Philip Watts was equally effusive.
        "I believe it represents a coming of age of a technology of fundamental importance for natural gas exporters and for fuel consumers," Watts said at ceremonies where he and Qatar Energy Minister Abdullah Hamad Al-Attiyah signed the plant development agreement.
        "These are not just any old middle-distillate [fuels], but uniquely clean fuels with a vital role in reducing engine emissions and supporting advances in vehicle technology," Watts continued. "They are the fuels of the moment, contributing to a sustainable future."
        GTL technology converts liquefied natural gas (LNG) into clear, colorless, biodegradable fuels that can be used in normal diesel engines and can also be blended into conventional diesel fuel. The fuels contain no sulfur, aromatic compounds or metals, producing emissions far lower than conventional fuels. Studies have shown GTL fuels lowering carbon-monoxide and nitrogen-oxide levels by 50 percent, particulate matter by 66 percent, and hydrocarbon emissions by 600 percent.
        That environmental marketability has already spurred a number of far smaller GTL projects around the world. Shell has one of them, a 12,500-barrel-per-day unit in Bintulu, Malaysia.
Ras Laffan Industrial City
Shell will build its plant in state-owned Ras Laffan Industrial City (pictured), part of Qatar's North Field, the world's single largest gas reservoir.

        The Qatar plant, though, takes the technology's profile to a heretofore unheard-of scale. At full capacity, the operation will produce 140,000 barrels per day of GTL products, primarily transport fuels and naphtha (which is used in producing synthetic natural gas).
        "We shouldn't underestimate the challenges of a project of this size, which will equal some of the world's largest refineries," said Watts.

Gas Goes from Obstacle to Vital
Resource for Many Oil Companies
Shell's GTL plant in Qatar is part of a significant behavioral shift in the oil industry.
        For many years, oil firms considered the natural gas frequently embedded in oil-bearing soils a tedious obstacle. Often, it was flared off at the wellhead. All that's changed, though, as companies increasingly look for energy sources like gas to supplant coal and oil.
        As its Qatar investment underscores, Shell is banking on gas's increasingly important role in the world energy order. Global demand for natural gas has grown by 3 percent in recent years, and increased during first-half 2003 by 8 percent. (Final 2004 demand totals haven't yet been released.)
        LNG terminal facilities, in fact, accounted for four of 2003's top 25 U.S. projects in capital investment, with a cumulative investment of more than $1.9 billion, according to Conway Data's New Plant database. (The top 25 projects will be included in the March 2004 issue of Site Selection.)
        The robust present, though, represents what's only a modest beginning, Shell thinks. Gas demand could outstrip oil by 2025, the company has predicted.

Qatar Looks to Corner Supply Side
Qatar is intent on serving that growing market from the supply side. The nation is pushing gas-sector growth, particularly in the GTL and LNG sectors.
        "The signing of this agreement for this first world-scale project is an important milestone in establishing Qatar as the GTL capital of the world," said Qatar Energy Minister Al-Attiyah.
        Qatar holds 14.8 percent of known natural gas reserves, trailing only Russia's 30.7 percent and Iran's 15.6 percent. More significantly, Qatar includes the North Field, the world's single largest gas reservoir, with reserves of more than 900 trillion cubic feet (27 trillion cubic meters).
        Shell is building its plant in the North Field, which Watts called "an ideal location for us to carry out research connected with the natural gas industries."
        The GTL plant agreement came not long after ExxonMobil (www.exxonmobil.com) signed a $12-billion LNG pact with Qatar. Beginning in 2008, Qatar will annually export 15.6 million tons (14.04 metric tons) of LNG to ExxonMobil for 25 years.
Shell's smaller GTL-fuel plant in Bintulu, Malaysia
Shell already has a smaller GTL-fuel plant online, the 12,500-barrel-per-day unit in Bintulu, Malaysia (pictured). The Qatar plant's capacity, however, will be more than 11 times greater.

        The Shell and ExxonMobil deals' combined $17-billion investment almost equals Qatar's gross domestic product. If the country's gas-related growth continues at its present clip, Qatar could surpass Indonesia as the world's largest LNG supplier by 2007, analysts estimate. Gas, in fact, is on a pace to replace oil in the next few years as Qatar's main income source.

Will GTL Fuels Catch Fire?
Shell plans a two-phase development of its Ras Laffan GTL plant, Watts said. The first phase, producing some 70,000 barrels a day, will go online sometime in 2008 or 2009. The second phase will be finished less than two years later.
        Shell's investment isn't without risks. "Clean" GTL fuels have never before been produced on such a large scale. It remains to be seen whether the products can be made for the right costs and at the correct volume for the market.
        But Shell isn't alone in thinking that the market is there.
        A study by petroleum industry consultants Gaffney, Cline & Associates, for example, estimates that GTL fuels will supply as much 5 percent of worldwide diesel fuel demand by 2010. Similarly, a study by Rice University's Baker Institute predicted that demand for middle-distillate GTL fuels will grow to 6.26 million barrels a day by 2010. Over the same period, traditional fuel oil demand will grow only 2.41 million barrels a day, the study projected.

GTL Trials in Berlin, London and Tokyo
Shell's initial GTL-fuel target market is public-transport bus systems in large cities, company officials say. Those vehicles are able to fill up on the new fuel at centralized depots. Over time, though, Shell wants to make GTL gas available at service-station pumps.
        The company is already rolling out the fuel made at its smaller Malaysian plant for selected trial runs. A fleet of Volkswagen Golfs in Berlin and DaimlerChrysler public-transit buses in London successfully used 100-percent GTL gas in the summer of 2003.
        Shell has now begun its third trial in Tokyo. GTL gas is powering two delivery trucks operated by Shutoken Consumers' Cooperative Union, a coalition of 13 Tokyo-based consumer co-ops. To date, at least, the project seems a hit at from both a bottom-line and front-of-the-nose perspective.
        "GTL Transport Fuel blends can be used in our existing diesel engines without investments in new infrastructure and deliver a cost-effective solution to reduce local pollutants emissions," said Shutoken Co-Op Executive Managing Director Shiro Wakamori. "Our members particularly appreciate the improved smell of the exhaust fumes."


©2004 Conway Data, Inc. All rights reserved. Data is from many sources and is not warranted to be accurate or current.