Shell returns in triumph to Qatar

Shell's commission of the world's largest gas-to-liquids plant in Qatar is a $19bn bet that the future is in natural gas.

RAS LAFFAN // Royal Dutch Shell is banking on a gas-powered future.

The vision even extends to the transportation sector, which until now has been the unassailable domain of liquid fuels such as petrol and diesel.

Shell does not doubt this will remain the case for years and decades to come. But nearly US$19 billion (Dh69.78bn) of the company's money says natural gas can be an economic source of high-quality liquid fuels for powering cars, lorries, trains and aircraft.

By using such fuels, polluting sulphur, carbon monoxide and particulate emissions from vehicles could be almost eliminated. Because cleaner fuels are more energy efficient, carbon dioxide emissions could also be cut.

It is a stunning wager that has led to the construction of the world's largest gas plant at Ras Laffan industrial city in Qatar. Lest the Pearl gas-to-liquids (GTL) plant be viewed as just another gas-processing facility, its developers are quick to point out that it incorporates a sophisticated chemicals plant, an air separation unit, a power plant and an oil refinery, all intricately connected by a three-dimensional maze of pipes stacked several storeys high in an area the size of London's Hyde Park and Kensington Gardens.

Shell holds about 3,500 patents on different parts of the complex series of chemical processes that take place within this labyrinth. Most relate to the microscopic structure of the cobalt and platinum catalysts needed to make the conversion processes run fast enough to be cost efficient.

Phase one of Pearl GTL, a joint venture between Shell and Qatar Petroleumthat last week produced its first barrels of a gas-derived diesel, comprises 86 separate units, which all had to put through exhaustive tests and instrumentation checks before they could be joined up to function in concert.

"It is like having 86 jumbo jets take off together and fly through the air in tight formation," said Roel Cornelisse, the vice president of production at Pearl GTL. Starting up the plant was a major achievement in which nothing more serious went amiss than a single case of wax entering the wrong pipe, causing a blockage that had to be cleaned out, he said.

Teams of engineers have been working around the clock to commission the giant plant for the past two months, smoothing out the final kinks before it was officially pressed into service this month.

A second phase of Pearl GTL, which will double the capacity of the project to its target level of 140,000 barrels per day (bpd) of fuels and lubricants plus 120,000 bpd of natural gas liquids, is under construction and scheduled for start-up by the middle of next year.

Shell and South Africa's Sasol are the only two companies to have previously built commercial gas-to-liquids plants, albeit on a much smaller scale.

Shell's 14,700 bpd Bintulu plant in Malaysia has been running since 1993. It was joined five years ago by the Sasol-led Oryx GTL joint venture at Ras Laffan, which produces up to 34,000 bpd of liquids.

Others, however, are watching carefully, including the Norwegian oil and gas company Statoil, which is seeking to develop floating gas-to-liquids technology.

"The world's total gas reserves are estimated to be approximately 160 trillion cubic metres. A substantial part of these reserves are situated far from the main gas markets without pipelines or other infrastructure," Statoil notes. "Hence, it is often referred to as 'stranded gas', and if converted into synthetic fuel could generate billions of barrels [of] synthetic oil."

Andy Brown, the Shell executive vice president who is also the managing director of Pearl GTL, is quite happy with his land-based technology, which he said was expected to provide "an acceptable rate" of financial return by Shell's international standards.

"This project sits in the range in which other big complex projects are sitting for Shell," he said.

The key to running a GTL plant efficiently, Mr Brown added, was to harvest and re-use the heat given off by the chemical reactions that convert gas into paraffin wax and wax into liquid fuels, "so you don't have to import any more energy".

That is certainly easier to achieve in a large land-based plant than in one floating at sea.

In the end, said Mr Brown, GTL technology should give Shell better access to markets for high-performance fuels and lubricants that fetch premium prices, bolstering profits from its petroleum refining and marketing division.

The biggest challenge Shell encountered with Pearl was fielding enough qualified workers for the project - at one stage it employed a workforce of 52,000 people from 60 nations.

There is no doubt that this month's commercial start of operations represents a triumphant return for Shell to Qatar, a country it left in the 1990s.

The company was invited back just seven years ago, when the Emir of Qatar, Sheikh Hamad bin Khalifa, set the goal of establishing the tiny Gulf state as "the GTL capital of the world". Qatar, which is now the undisputed world leader in liquefied natural gas exports, sits on the world's third-largest gas reserves.

"We left for business reasons. We were a service provider; we didn't have any equity here; and we had a couple of disputes," said Mr Brown. "But now we regret that we left."