Back to top

Analyst Blog

Integrated energy giant, Royal Dutch Shell plc (RDS.A - Analyst Report), has selected Ascension Parish on the Mississippi River in Louisiana as the location to build a gas-to-liquid (GTL) facility. The construction would cost the company at least $12.5 billion.

The multibillion-dollar plant will produce liquid fuels (like gasoline and diesel) from natural gas with the aim of reducing emissions from the level emitted in liquids produced from oils. Such a facility would also support the company’s efforts of increasing the use of natural gas.  

The Louisiana government believes that if Shell builds the project in Ascension Parish, it could avail the opportunity of expanding its manufacturing operations onshore.

Shell has been offered a reimbursement of $112 million by the government for its contribution to infrastructural and other project-related development, if any. The company would also be eligible for the Industrial Tax Exemption Program and the Competitive Projects Payroll Incentive Program.

Shell plans to build small scale facilities that would liquefy natural gas, producing fuel for vehicles. It also plans to supply liquefied natural gas to 100 refueling stations spread across the country. Apart from creating a large number of jobs, the project is expected to positively impact the economy over the course of its construction as well as in its first 15 years of operation.

Shell’s first commercial GTL plant was established in Malaysia in 1993. Since then the company has continued to use natural gas as a replacement for oil to produce liquids, thus, reducing the dependence on imported oil.

Royal Dutch Shell currently retains a Zacks Rank #4 (Sell), implying that it is expected to underperform the broader U.S. equity market over the next 1 to 3 months.

Meanwhile, one can consider other stocks in the energy sector such as Dril-Quip, Inc. (DRQ - Analyst Report), Magellan Midstream Partners LP (MMP - Analyst Report) and Seacor Holdings Inc. as attractive investment opportunities. All these currently hold a Zacks Rank #1 (Strong Buy).  
 

Please login to Zacks.com or register to post a comment.