Increased construction cost scraps planned gas-to-liquids project
Royal Dutch Shell plc said Thursday it won’t build a plant to convert natural gas to diesel in Ascension Parish because the estimated construction cost of at least $12.5 billion in September has since ballooned to more than $20 billion.
The project cost means that a U.S.-based gas-to-liquids project isn’t viable, according to Shell.
The gas-to-liquids plant would have been the largest single manufacturing project in the Capital Region’s history and one of the three largest in Louisiana. The proposed plant was expected to create 740 jobs with an average salary of $100,000, plus benefits; 10,000 construction jobs at peak demand; and 3,900 indirect jobs.
A Louisiana Economic Development study estimated the plant’s economic impact at $77.6 billion during construction and the first 15 years of the plant’s operation.
LED Secretary Stephen Moret said in a statement Thursday that while Shell’s announcement is “obviously very disappointing news,” Louisiana remains an attractive market for economic development projects.
“Our state is being actively considered for several other multibillion-dollar projects by other global companies, and we have tens of thousands of other jobs on the way from previously announced projects, so Louisiana’s economic outlook remains very bright,” he said.
In October, Loren Scott, a retired LSU economics professor, released his economic outlook for Louisiana. Scott said metro Baton Rouge had $34.7 billion worth of industrial construction projects in the pipeline, not counting the Shell project.
Shell’s announcement caught Ascension Parish President Tommy Martinez by surprise.
“It was a little bit of a shocker,” Martinez said.
However, Martinez said, Ascension has a number of other major projects underway, such as CF Industries’ $2.1 billion fertilizer plant expansion and Methanex’s $1 billion methanol complex.
“It’s not that we’re happy that it’s not coming. But it’s not like that not coming is going to be the end of what we’re doing in the parish,” Martinez said.
The proposed site, near Sorrento, had frontage on La. 70 and La. 44.
“We are making tough choices here, focusing our efforts and capital on the most attractive opportunities in our worldwide portfolio, to add value for shareholders,” CEO Peter Voser said of the company’s decision.
Just two months ago, Shell announced it had selected a site for the proposed plant, a required part of the permitting process and had begun holding public meetings. At the time, the company said each capital project has to go through an extensive vetting process and it might be two years before the company decided whether to build.
On Thursday, Voser said the project cost and the uncertainty of long-term oil and natural gas prices played a part in Shell’s thinking.
Shell’s was the second major project cancelled in the last eight weeks. In late October, Mosaic Co. announced it would not build a $1.1 billion ammonia plant in St. James Parish.
Instead, Mosaic will buy its ammonia from CF Industries’ expanded plant.
Moret has said there are six major projects, including two $2 billion ethane crackers, two $1 billion fertilizer plants and two methanol plants, that have a very high probability of moving into Louisiana. The capital region has the unique characteristics to pick up one or more of the projects.