BATON ROUGE, La. - Royal Dutch Shell (NYSE:RDS.B
, Stock Forum
) has decided to abandon plans to build a massive $12.5 billion plant in Louisiana that would have turned natural gas into liquid fuels like diesel.
The decision comes just two months after Shell selected a site for the plant. It would have created 740 jobs, according to a late-September announcement that championed the plant's location in Ascension Parish, near Baton Rouge.
Shell, based in the Hague, Netherlands, said Thursday that the cost of the plant and the expected profit it could generate made the plant “not a viable option.”
Gov. Bobby Jindal's administration had offered an incentive package that included $112 million for road improvements, land purchasing and other infrastructure in Ascension Parish.
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.
The plant would have turned natural gas, which is relatively cheap in the U.S. compared with prices around the world, into higher-value diesel and gasoline using a complex process involving heat and chemical catalysts. To justify the plant's enormous expense, the cost of natural gas would have to remain very low - and the price of diesel very high - for more than a decade.
Many analysts believe U.S. natural gas prices will remain low, thanks to enormous reserves of natural gas found in recent years under several states. But the U.S. is also increasing demand for natural gas by building export facilities, using it to generate more electricity and developing truck engines that will burn it for fuel. This could increase prices somewhat.
At the same time, many expect oil prices to remain flat or fall slightly over the next several years as the U.S., Canada and other countries produce more oil at a time when demand is growing only moderately.