Energy major Royal Dutch Shell plc (RDS.A) announced the first shipment from its flagship Pearl gas-to-liquids (“GTL”) development in Qatar. The long-awaited start-up of the $19 billion project – being built in collaboration with state-run Qatar Petroleum – marks a major milestone for the stakeholders.
The biggest energy project ever launched in the desert sheikdom, Pearl GTL recently sold its first cargo of gasoil – a clean-burning diesel-type fuel – from the initial train (unit) of the plant in the industrial city of Ras Laffan. During the course of the next few months, production (including diesel, kerosene, naphtha and lubricant oils, as well as condensates and liquefied petroleum gas/LPG) is expected to ramp up from the first train, while the second unit is likely to come online before the end of the year.
The state-of-the-art plant – that employed 52,000 workers at the peak of construction – is due to reach full capacity by the middle of 2012, whereby it will churn out 1.6 billion cubic feet of gas per day from Qatar's North Field, which started delivering supplies to the project in March. This gas will then be processed to supply an expected 120,000 barrels per day of condensate, LPG and ethane and an expected 140,000 barrels per day of GTL products such as diesel, kerosene, lubricant oils, naphtha and paraffin.
Pearl, Shell's most expensive project and by far the largest GTL plant in the world following full operability, will process about 3 billion barrels-of-oil-equivalent over its life span from the huge North Field that stretches from Qatar’s coast into the Gulf and contains more than 900 trillion cubic feet of gas. Incidentally, the Persian Gulf nation owns the world’s third-largest gas reserves and is the world’s biggest LNG exporter.
We view the Pearl breakthrough as a crucial event for The Hague-based group, the largest foreign investor in Qatar with a leading position in natural gas. In fact, Royal Dutch Shell is the second largest natural gas producer in the world and has led its super major peers in monetizing its substantial worldwide equity natural gas resource base by investing in LNG and GTL technologies. Shell sees natural gas playing an important part in its future and expects natural gas to represent 52% of total volumes by 2012.
Royal Dutch Shell – Europe's biggest oil company by market value ahead of BP plc (BP) and Total SA (TOT) – owns one of the largest integrated energy businesses in the world. The group has operations all over the world and is involved in various activities related to oil and natural gas, chemicals, power generation, renewable energy resources and other energy-related businesses.
Royal Dutch Shell ADRs currently retain a Zacks #3 Rank, which translates into a short-term 'Hold' rating. We are also maintaining our long-term 'Neutral' recommendation on the stock.
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