Shell said the cost of the plant and the expected profit it could generate made the plant not a viable option.
BATON ROUGE, La.—Royal Dutch Shell has abandoned plans to build a $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 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.
“Today’s announcement is disappointing, particularly after Louisiana was selected over Texas and other states in a highly-competitive selection process,” Jindal said in a statement. “We fight for every single job opportunity available, and we will continue to do that.”
Economic Development Secretary Stephen Moret said Louisiana is being considered for several other multibillion-dollar projects and has other large projects on the way.
The plant would have turned relatively cheap natural gas 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, building new chemical plants that use natural gas, 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.