Qatar Petroleum and Shell are scrapping of one of the world’s biggest new petrochemical plants in the world in the face of tumbling oil prices.
Work started on the $6.4bn (£4.2bn) Al Karaana project in 2012 and the plant in northern Qatar was due to come online in 2018. The partners had already awarded a number of contracts for the scheme, but have suspended all work with immediate effect.
Shell declined to say how much it had already spent on Al Karaana, or whether it would have to include a significant write-off in its first-quarter results. The project was 80 per cent owned by Qatar Petroleum and Shell.
In a joint statement yesterday they said: “The decision came after a careful and thorough evaluation of commercial quotations from engineering, procurement and construction bidders, which showed high capital costs rendering it commercially unfeasible, particularly in the current economic climate prevailing in the energy industry.”
Sources suggested that it was not just the fall in oil prices, which have more than halved since June last year, which forced the decision to scrap the project.
These include instability in the region, which could have led to concerns over the certainty of continuous supplies of oil and natural gas to the plant.
At the other end of the project there is more uncertainty over demand and pricing for the products it was designed to produce, such as monoethylene glycol and linear alpha olefin, which are both used in polyester, polythene and plastic-bottle manufacturing.
Shell shares fell 4 per cent to 2,052p yesterday.
Meanwhile, shares in Premier Oil fell 3 per cent to 132p after it warned that it will take a $300m (£200m) hit on the value of its assets because of the slide in oil prices. It said it had already planned to cut operating costs by 10 per cent, but would now look for further savings.Reuse content