Shell will press on with new plants to convert gas to liquid fuels, its investment and technical edge leaving its peers behind in the process once seen as a radical game changer.
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The company has seen costs overrun at its flagship Qatar plant, canceled a U.S. project and is relying on a favorable link between prices for feedstock natural gas and oil - factors which have jangled the nerves of some investors in Royal Dutch Shell
Investors are also wary of the massive upfront costs companies face in building the gas-to-liquids (GTL) plants. Only Shell and South Africa's Sasol have so far made GTL plants work on a large scale.
"Shell is so far ahead technically," said Ed Osterwald, who has advised companies and governments on GTL and is a partner at consultants Competition Economists Group. "It is hard to see how another large company is going to replicate that."
Recent indications on GTL's propects have have been mixed. Costs overran at Shell's $19 billion plant in Qatar. In December it canceled a proposed plant in Louisiana as costs rose.
But last week, Sasol said it will carry out a feasibility study to build a large site in Mozambique with Eni of Italy. Shell is also studying the feasibility of building a plant there.
The plants are based on a process developed in the 1920s by two German scientists, Franz Fischer and Hans Tropsch. Shell has developed the process further and has more than 3,500 patents. Sasol also has its own GTL technology.
Only a handful of projects exist. Shell operates Pearl in Qatar, the world's largest, and has a smaller site in Malaysia. Sasol has a plant in Qatar and plans to build more, including in the United States. A Chevron project in Nigeria using Sasol technology is starting this year.
A decade or more ago, the prospect for GTL looked brighter. "Gas into oil may revolutionize energy" read a Reuters headline from 1998. Exxon Mobil in the early 2000s planned a similar plant to Pearl, but in 2007 canceled it.
Shell says that the cancellation of its own U.S. project does not mean it has given up on expanding.
"We continue our investment into technology development and product development to increase the value of future GTL projects," said Guy de Kort, a Shell vice president, at a conference in London.
"We are pursuing other opportunities as well. But the economics have to be convincing enough to put our money there."
Some Shell investors are less enthusisatic than executives about further large GTL projects. Costs at Pearl soared to $18-$19 billion from $5 billion initially.
"Gas to liquids is like an arbitrage investment; it depends on relationships between the commodities," said a UK-based fund manager, a Shell investor. "Avoid investments that depend on a moving price spread."
Shell is happy with how Pearl is performing. Even executives at rival companies say the investment turned out well as oil prices have risen since 2006, much more than gas prices.
But even with a large source of gas at its disposal and assuming that its energy price forecasting team comes up with favorable numbers, a potential plant builder still needs to take a brave punt.
"You have to believe that that arbitrage gap is going to sustain itself," said Osterwald. "It is very expensive and there are a lot of risks, but in the right way it can be very successful."
Smaller projects could be a way forward for the technology that companies including UK-listed Velocys are looking to exploit.
Velocys says its GTL techology works at a smaller scale of 1,500-15,000 bpd and estimates there is a large market to convert gas in remote locations and at smaller fields.
"There is no small-scale one yet that's commercial," said Neville Hargreaves, business development manager at Velocys. "But it's coming."