Shell's multibillion-dollar gamble in Qatar is starting to pay off.
The oil major is bringing online the various parts of a huge US$19bn (Dh69.78bn) plant designed to convert the emirate's natural gas resources into fuel. It shipped its first cargo to Europe yesterday, and a second is planned for the coming weeks, according to Shell.
"This is still in very early stages," said Maartje Snellen, a Shell spokeswoman in Doha. "For us, it is the proof of concept that the technology is able to run on a world scale."
The Pearl project in Ras Laffan, an industrial city on the coast, represents Shell's re-entry to the emirate after it left in the 1990s. It is also one of the company's biggest single investments, with The Wall StreetJournal calling it "one of the most expensive gambles on clean fuel in the history of the energy industry".
The environmental justification is that using the emirate's relatively cleaner natural gas, rather than oil, to make fuel for vehicles and aircraft ultimately cuts down on the amount of harmful greenhouse gases released into the atmosphere.
The economic justification is more obvious: Qatar has the world's third-biggest reserves of natural gas, but that cannot be piped to international markets. One solution is to turn it into liquefied natural gas (LNG) and ship it abroad. Qatar already holds the title of the world's top LNG exporter. But, by going further up the value stream to products such as lubricants, Qatar can reap higher returns. The plant is expected to enhance "Qatar's competitive position in the world markets", said Mohammed al Sada, the Qatari energy minister. Qatar Petroleum, the state-owned oil company, is Shell's partner in the project.
By the middle of next year, the plant is due to convert gas 1.6 billion cubic feet of gas a day into kerosene, petrochemicals feedstocks, paraffin for detergents and gasoil, a clean-burning fuel similar to diesel. The combined production lines are planned to produce 140,000 barrels per day (bpd) of liquids, vastly more than other plants.
Shell's other gas-to-liquids plant, in Malaysia, produces about 10 per cent of that amount. South Africa's Sasol has invested in another plant in Qatar that produces about 34,000 bpd. Shell began commissioning its Qatar plant in May last year, but hold-ups delayed the first commercial shipment until yesterday.
The company covered the cost of building the plant, an increasingly common scenario as governments in the region look to the private sector to finance large infrastructure projects.