Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Will Royal Dutch Shell plc (ADR) (RDS.A) Build Another Gas-to-Liquids Plant?

With the surge in natural gas production in the U.S. and other countries around the world, companies are constantly finding new ways to put the cleaner-burning fuel to work. Some U.S.-based firms, for instance, are looking to export gas in liquefied form, known as LNG, to countries that don’t have a free trade agreement with the U.S.

Royal Dutch Shell plc (ADR) (NYSE:RDS.A)Thus far, however, only two LNG export ventures have been approved by U.S. lawmakers: Cheniere Energy, Inc. (NYSEMKT:LNG)’s Sabine Pass terminal, which was given the green light in 2011, and the Freeport LNG project, an $11 billion facility in Texas whose general partner, Freeport LNG-GP, is 50% owned by ConocoPhillips (NYSE:COP), which was approved earlier this year.

Meanwhile, a select few other companies are thinking about using natural gas in a very different way – by turning it into higher-value petroleum distillates, including diesel, naphtha, and lubricant base oils through a technology known as gas-to-liquids refining, or GTL. Royal Dutch Shell plc (ADR) (NYSE:RDS.A) is one of the leaders in the use of this technology and is currently thinking about building another GTL plant on the U.S. Gulf Coast. Let’s take a closer look.

Shell and GTL
Royal Dutch Shell plc (ADR) (NYSE:RDS.A) is well versed in the intricacies of the GTL process. The Hague-based company has spent nearly four decades researching GTL technology and has extensive experience in operating GTL facilities, including the world’s first commercial GTL plant in Bintulu, Malaysia, and the Pearl GTL facility in Qatar, currently the world’s largest.

Since Pearl came on stream in 2011, Royal Dutch Shell plc (ADR) (NYSE:RDS.A) has improved its proprietary GTL technology further still. If the company were to construct another GTL plant similar in size to Pearl, technological improvements and efficiency gains could deliver a 50% improvement in throughput volumes over Pearl, according to Royal Dutch Shell plc (ADR) (NYSE:RDS.A)’s top GTL scientists.

Improvements in catalysts and synthesis reactors – the core process unit of a GTL plant – will also allow the company to use fewer reactors in future projects.
 In fact, Royal Dutch Shell plc (ADR) (NYSE:RDS.A)’s head GTL process engineer, Arend Hoek, told Platts that it would be possible to achieve the same throughput levels as Pearl but with a third fewer reactors.

Matthias Bichsel, Royal Dutch Shell plc (ADR) (NYSE:RDS.A)’s projects and technology director, reckons that cost savings from these and other process efficiencies and technological improvements should be “in the 15% range, perhaps a bit more”.

Massive capex for Gulf Coast plant
However, these savings may not be enough to offset the daunting costs of building such a massive GTL export plant on the U.S. Gulf Coast, despite the ample supply of cheap natural gas feedstock the plant would be able to access. Shell reckons the plant, which would be similar in size to Pearl, would cost more than $10 billion.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.