August 28, 2012
By Andrew Callus And Peg Mackey - REUTERS
- GTL Plants Are Being Considered In Louisiana And Texas
Shell estimates duplicating the plant would cost $10 billion --Ed.
A Qatari project that has been a drain on Royal Dutch Shell's capital since 2003 is on the verge of turning into a unique asset that will produce billions of dollars a year in cash for the next 25 years.
Shell shareholders in 2013 should see significant benefits from Pearl GTL, a gas-to-liquids fuel project which until now has been notorious for a development cost overrun to $18-$19 billion from the original $5 billion and which is still late for its mid-2012 date for full production.
Shell says both Pearl's trains have now operated at between 90 and 100 percent of design rates, and even though maintenance issues have run into the third quarter and kept them from working together at full capacity, that moment now could be just around the corner.
Shell has said the project would generate $4 billion of free cash flow a year at full production in a market with crude oil prices, the main determinant of the price of diesel, at $70 a barrel.
Free cash flow - cash in the bank from sales after subtracting capital spending - is among the purest profit measures.
Shell will say only that returns are in line with other integrated gas projects, but given that Brent crude now sells for over $110 a barrel, while the gas going into Pearl is effectively free, it could clearly be a significant contributor to one of the world's biggest corporate capital spending budgets - at some $30 billion this year alone.
Analysts say crude prices would have to fall below $40 a barrel before the plant loses money.... [Read More]