Shell Backs Out of Louisiana Gas-to-Liquids Project

Not sure if you need a subscription to read this: 

http://online.wsj.com/news/articles/SB10001424052702304096104579240...

.... so here it is, short and sweet.

Great news for the Beaver County Cracker site, hopefully this is one of the 3 projects that needed terminated so they can go forward here!!!

"Oil giant Royal Dutch Shell RDSB.LN -0.19% PLC said Thursday it won't proceed with a proposed gas-to-liquids project in Louisiana due to the likely development costs and uncertainties over long-term oil and gas prices.

Shell said in September that it had selected a site south of Baton Rouge for a potential multibillion-dollar project to convert natural gas into liquid fuels, such as diesel and gasoline.

"We are making tough choices here, focusing our efforts and capital on the most attractive opportunities in our world-wide portfolio to add value for shareholders," said Chief Executive Peter Voser Thursday.

Shell proposed the Louisiana project last year to take advantage of vast natural-gas reserves unlocked by the successful combination of hydraulic fracturing and horizontal drilling. If built, the project would be similar to Shell's Pearl gas-to-liquids project in Qatar, which can produce about 260,000 barrels of liquid fuels a day."

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Permalink Reply by cattlerancher on December 5, 2013 at 9:53am

Wow..............That is really good news for Beaver County.  Certainly no guarantee that Shell is coming to Beaver County but it appears to be a big step in the right direction.  Only time will tell.  I am thinking we will know some time in the first quarter in 2014.  Which is right around the corner.  Even Tom Corbett was quoted as saying he expects a decision by Shell in early 2014. 

Permalink Reply by Trapper on December 5, 2013 at 10:36am

Good news! Looks like our 30% shot at the cracker just increased to 50% !

Permalink Reply by Chris Crawley on December 5, 2013 at 10:49am

Trapper,

Seems like I recall  the comment by the Shell CFO was that they couldn't build all "3" of the projects in planning?  Since one of those has now been eliminated doesn't that indicate the other two should be good to go..Looking like those odds may be better that 50%..

Permalink Reply by Trapper on December 5, 2013 at 11:13am

You just may be right Chris. Let's hope so!

I just wonder how soon the drilling will ramp up after the decision is announced. There needs to be some serious infrastructure/gathering system work done and many leaseholds drilled in the next 2-3 years to HBP. I wonder what the chances are of getting another bonus due to renewal?

Permalink Reply by Chris Crawley on December 5, 2013 at 11:54am

I'm wondering if SWEPI will let the leases expire and then try and re-sign everone for more favorable terms for them..Seems like a dangerous position to get into. I was part of the first Mt Jackson group that signed with Hilcorp, several hundred owners with all the leases expiring on the same day..Don't think many will be interested in signing a new lease with less favorable terms..Don't see how it would even be possible to handle on an individual basis..We've still got 3 yrs left on the original lease so they have lots of time to HBP a lot of acreage..

Permalink Reply by Trapper on December 6, 2013 at 10:04am

Good question. I have the "extension of term" verbage in my lease with Shell,BUT it is at the discretion of the lessee. If they try to undercut initial terms with a new proposal we will just have to stick together and stay unified somehow. It will be interesting to see how they handle this if it comes to that. Like you said , though , alot can be accomplished in 3 years to HBP us. I have heard Shell is pretty sensitive to it's perception by lessors so hopefully we will not cross that bridge.

Let's get this show on the road!

Permalink Reply by Jim Litwinowicz on December 7, 2013 at 7:17am

Just like I predicted about ten days ago. Gas to Liquids(gasoline/diesel) is an expensive process and the price of crude/gasoline will drop as more domestic oil comes online. The Utica, Eagle Ford, Monterrey, Niobrara, Bakken, and several more formations will be producing a lot of cheap oil. 

Still doesn't guarantee the cracker plant but it certainly helps.

Permalink Reply by Trapper on December 7, 2013 at 5:13pm
I'll give you credit on this one Jim.
Just remember I predicted the Horse Head site to be chosen for the Cracker! LOL! ;-')
Permalink Reply by Jim Litwinowicz on December 8, 2013 at 5:09am

Trapper; you certainly nailed that one. And I remember I said "no way as that site has to be an environmental disaster after a 100 yrs of zinc smelting." I thought no company would touch that si

Permalink Reply by Trapper on December 8, 2013 at 5:27am

I guess it's all about location,location,location!

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