Shell has delivered a blow to Louisiana's industrial boom, saying it is scrapping a proposal to build a $12.5 billion natural gas-to-liquids plant in Ascension Parish.
The company announced Thursday that it was suspending further work on the project, which would have created 740 direct jobs and thousands more in spinoff employment.
Shell says the project isn't viable because of factors including high cost and uncertainty in long-term oil and gas prices.
Gov. Bobby Jindal's administration had offered an incentive package that included $112 million for road improvements, land purchasing and other infrastructure.
Economic Development Secretary Stephen Moret calls the abrupt decision very disappointing. But he says Louisiana is being considered for several other multibillion-dollar projects and has other large announced projects on the way.
Moret released the following statement to WAFB:
Shell's abrupt decision to cancel its North American GTL project just 10 weeks after concluding a multi-year, multi-state site-selection process is obviously very disappointing news. Earlier this year, outgoing Shell CEO Peter Voser publicly identified North America as a region of opportunity for the company due to the ongoing shale gas revolution, and he identified GTL as an option for capitalizing on this North America opportunity. Unfortunately, his more recent public comments have suggested that Shell has more investment opportunities around the world than it has capital to fund them.
Shell operates with a global portfolio of investment opportunities in energy and petrochemical sectors and thus has a broad range of investment options under consideration at any time. Shell appears to have determined that a U.S. GTL project is not as certain to be as profitable for their shareholders as other opportunities.
Anytime we have an opportunity to compete for a major economic development project, it's incumbent upon us to do everything we can to secure it. That's what we did in this case over several years. Fortunately, our state is being actively considered for several other multi-billion-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. Moreover, Sasol's planned world-scale ethane cracker / GTL facility in Southwest Louisiana remains on track.
Ascension Parish Council Chairman, Chris Loar, says he received a call from a Shell representative Thursday morning notifying him that the board of directors decided they were not going to invest in this project anywhere in North America.
Loar says it was a shock and a big disappointment, clearly a loss for the region. He says the Shell plant would have been nice to have, but the chemical industry is doing well there.
Shell released a statement as well:
The Hague (December 5, 2013) - Royal Dutch Shell plc ("Shell") today announces that the company will not move forward with the proposed 140,000 barrels per day Gulf Coast gas-to-liquids (GTL) project in Louisiana and will suspend any further work on the project.
Shell is the industry leader in GTL technology, and the company has carefully evaluated a number of development options for GTL on the US Gulf Coast, using natural gas feedstocks. Despite the ample supplies of natural gas in the area, the company has taken the decision that GTL is not a viable option for Shell in North America, at this time, due to the likely development cost of such a project, uncertainties on long-term oil and gas prices and differentials, and Shell's strict capital discipline.
Shell is the leading energy company in integrated gas, which includes liquefied natural gas and GTL. The company has built up substantial new options for integrated gas investment, particularly in Australia and North America in recent years.
CEO Peter Voser commented "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."
Shell thanks the Governor of Louisiana, his staff, Parish officials, regulators and the community for the opportunity to consider locating this project in Louisiana, and the company looks forward to continuing a long, successful relationship with the state.