Escalating Costs Force Exxon and Qatar to Dump GTL Project

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Researched by Industrial Info Resources (Sugar Land, Texas). Rising input costs have become a major element in the post-feasibility commitment of investors in hydrocarbon-based plant projects. Pressure on construction resources and the globally thin spread of qualified project engineers are complementary factors in the price rise and cost squeeze.

A spate of gas-fed projects in Qatar have pushed up raw material and labor costs. This local condition has taken place against a backdrop of rising global costs as new capacity is fast tracked to meet the rising demand for energy and debottleneck the supply chain.

Quoting ‘spiraling costs’ Qatar Petroleum (QP) and ExxonMobil (NYSE:XOM ) (Irving, Texas) are walking away from the plan to build a 154,000-barrel per day (bpd) gas-to-liquids (GTL) plant in Qatar and have turned their attention to developing the Barzan section of the country’s massive CCCCCCCCfeet per day from 2012 to meet growing demand from the domestic market.

The Qatari Energy Minister Abdullah Al Attiyah said that GTL technology is expensive and very technical. He added that other projects in Qatar were not under threat and that ground would be broken this week (Thursday, February 22, 2007) on the GTL project with Shell (NYSE:RDS ) (London, United Kingdom) participating as a partner. Project estimates have risen for this project from $3 billion in 2003 to the current $18 billion. Although Exxon has not revealed the current estimates for the project, the initial budget for the scheme in 2004 was $7 billion.

ExxonMobil is the largest foreign investor in Qatar’s energy sector and has stakes in the massive Rasgas and Qatargas LNG projects. It also has the Al Khaleej gas project at the North Field for which costs are estimated at $1.1 billion in the first phase and $3.3 billion in the second phase. If these cost are comparable to the Barzan gas field investment decision, some of the motivation for the switch fro the GTL project is apparent. For related news item see February 9, 2007 – Sasol Chevron Moving on Australian GTL Project as ORYX Goes Onstream

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