Shell’s Major Shift to Natural Gas, US Gas-to-Liquids Plant?

Shell is moving into natural gas in a major way. In fact, natural gas will eclipse crude oil for Shell sometime next year by being more than 50 percent of Shell’s global production. Shell has committed to spending $2 billion to build an ethane cracker plant in the Marcellus region of the U.S., and now they are talking about building a gas-to-liquids plant. Shell invested an astonishing $19 billion in a gas-to-liquids plant in Qatar. Imagine that investment coming to the U.S.! Such is the transformative power of shale gas.

Royal Dutch Shell Plc, Europe’s largest energy producer, is weighing options for rising North American natural-gas output including exports and making liquid fuels, Chief Executive Officer Peter Voser said.

Shell will double North American gas production in the next three years to the equivalent of 400,000 barrels of oil a day as output from shale deposits rises, Voser said in an interview. Shell may channel gas into chemical production, an export project in Canada, and a program to use the fuel to power trucks, he said.

“We are getting now into production phase in a big way,” Voser said at the World Petroleum Congress in Doha, Qatar. “It’s about the right time to look for further options. We are really looking at the usage of gas in a much wider way in North America.”

Pumping gas trapped in shale rocks has transformed the U.S. into the world’s largest gas producer, cut prices about 75 percent from their 2008 peak and made exports to higher priced markets in Asia and Europe a viable option. The fuel will overtake crude oil to account for more than 50 percent of Shell’s global production next year, driven in part by the development of shale gas fields in Texas and Pennsylvania.

“This percentage goes up over the next years to come as most of our projects are actually gas projects,” Voser said. “Given our huge gas reserves in the U.S. we are looking at a possibility to actually build a gas-to-liquids plant.”*

Natural gas and associated products (like ethane) are so cheap due to shale gas, it’s making exports attractive, an area Shell is also closely reviewing. Right now, natural gas prices are the equivalent of $27 per barrel of crude oil. Crude oil on the open market is currently around $100 per barrel—so you can see why North American natural gas has captured the interest of major energy companies like Shell.

*Bloomberg News (Dec 6, 2011) – Shell Weighs Options for U.S. Shale Gas