We’ve had a number of posts here at the Hayride on a colossal economic win for Louisiana in the petrochemical sector – and a potential game-changer at the nexus of the state’s vast natural gas deposits and its busy transportation fuels refining sector.

Enter today’s announcement – some two years in the making – that in Ascension Parish near Sorrento, Shell will be laying down a $12.5 billion gas-to-liquids refinery that will turn natural gas from the Haynesville Shale and other nearby fields into high-quality vehicle fuels. From a release out of Gov. Bobby Jindal’s office…

Today, Governor Bobby Jindal and Shell announced the selection of Ascension Parish as the location for a potential natural gas-to-liquids (GTL) facility. According to the terms of an incentive agreement with the state, the company at a minimum would spend $12.5 billion and create 740 direct jobs, should the project be built. The expected average annual salary of the direct new jobs would be approximately $100,000, plus benefits. LED commissioned an economic impact analysis from Louisiana State University (LSU) that indicates the 740 new direct jobs would result in approximately 3,900 new indirect jobs, for a total of more than 4,600 new permanent jobs in Louisiana. LSU further estimates the project would produce a total economic impact of $81.6 billion over the construction period and the first 15 years of operation.

At peak building activity, Shell estimates the project would create up to 10,000 construction jobs. A final decision to build the proposed project would be made after site evaluation and preliminary engineering studies are completed. Construction would follow that decision.

Governor Jindal said, “For more than six decades, Shell has pursued oil exploration and production in both Louisiana and offshore in the Gulf of Mexico, employing thousands of our people with high-paying energy jobs. Today’s announcement is a historic new opportunity for Shell to potentially expand its manufacturing operations onshore in a world-class, gas-to-liquids facility in Ascension Parish on the Mississippi River. Here in the heart of Louisiana’s world-scale petrochemical industries, the Gulf Coast GTL project would give thousands more of our people an opportunity for a rewarding career right here at home. We know that the final investment decision is yet to come, but we also know that Shell’s selection of Louisiana proves once again that there’s no better place in the world for major business investment. Shell joins many companies who are expanding in Louisiana because of our strong business climate, outstanding energy and chemical infrastructure and our highly skilled workforce.”

Shell’s Gulf Coast GTL facility would be one of the first of its kind built to commercial scale in the United States. As a leading producer in the Gulf of Mexico with approximately 150 million barrels of oil each year, Shell also operates extensive onshore facilities in Louisiana, including its Norco and Geismar plants, a major training center in Robert, and corporate offices in New Orleans. If built, the proposed project would use natural gas to create cleaner-burning transportation fuels, such as natural gas-based diesel and jet fuels and other products, such as specialty waxes and the building blocks for lubricants, plastics and detergents. As part of America’s energy mix, GTL technology can help the U.S. meet its growing transportation needs while advancing the nation’s energy security.

“Selecting a site is an important step that allows us to conduct more detailed planning, technical analysis and begin the permitting process. Should we move forward with the project, we expect project costs to be well in excess of the minimum spend that was agreed upon with the State of Louisiana,” said Executive Vice President Jorge Santos Silva, who directs Integrated Gas activities for Shell Upstream Americas. “We look forward to working with our prospective neighbors and other interested parties. Through it all, we are committed to keeping people safe, protecting the environment and being a good neighbor.”

An estimated $32 million in road improvements associated with the proposed GTL project will address traffic generated by the construction and operation of the facility. The Louisiana Department of Transportation and Development will begin moving forward this year with projects that benefit the industry and those who travel throughout St. James and Ascension parishes. Based on the status of its project evaluation, Shell would fund new road projects, including new turning lanes, expansion of Louisiana Highway 22 to four lanes from Interstate 10 to Louisiana Highway 70 and expansion of Louisiana Highway 70 to four lanes from that intersection to the Sunshine Bridge. The improvements currently are targeted for completion in the fall of 2016. Contingent on a final decision to move forward with the Gulf Coast GTL project, Shell would be reimbursed for this total cost from performance-based infrastructure grants provided by the State of Louisiana.

The State of Louisiana offered Shell a competitive incentive package that would include a performance-based grant of $112 million to reimburse costs associated with necessary public road improvements, land acquisition and other infrastructure costs. Shell also would receive the services of LED FastStart®, the nation’s No. 1-ranked state workforce training program. In addition, the company would qualify for Louisiana’s new Competitive Projects Payroll Incentive (12 percent payroll rebate for each GTL job), as well as the Industrial Tax Exemption Program.

Louisiana has cultivated GTL projects with Shell and other global energy companies in recent years.

Shell is a demonstrated leader in natural gas-to-liquids, with 40 years of experience and 3,500 patents in development. Shell built the first commercial GTL facility in Malaysia in 1993. In 2011, Shell began production at Pearl GTL in Qatar, a joint venture between Shell and Qatar Petroleum, the world’s largest GTL plant. The Gulf Coast GTL proposed project would be located in Ascension Parish near Sorrento, La.

About Gulf Coast GTL
The Gulf Coast GTL project is operated by Gulf Coast GTL LLC, an affiliate of Shell Oil Company and a part of the Royal Dutch Shell PLC group of companies. Shell is exploring the possibility of a GTL facility on the U.S. Gulf Coast, focusing on a site in Ascension Parish near Sorrento, La. Shell is a leader in global natural gas-to-liquids technology, with 40 years of experience and 3,500 patents in development. If built, the proposed Gulf Coast GTL project would use abundant, affordable natural gas in new ways, creating cleaner-burning transportation fuels and other products – typically made from oil – to enhance energy security, broaden the energy mix, deliver jobs, and promote economic growth.

The Shell project follows on the heels of an even bigger gas-to-liquids refinery being constructed in Lake Charles by Sasol, who came to the same calculation about the abundance of natural gas as a feedstock and the economics of refining gas into liquid vehicle fuel.

Between those two refineries, and a few smaller projects in the same area of endeavor, Louisiana is very quickly becoming the center of an industry with what could be a big future – namely, conversion of natural gas into transportation fuel. Should GTL become a major player in the transportation mix, it could easily be the key to American energy independence and the end of reliance on oil from countries who don’t like us.

And what’s more, the emergence of a major demand for natural gas from the petrochemical industry, at a level far greater than what has been the case over the past, say, three years, could make a lot of landowners in this state filthy rich.

If you drive up I-49 to Shreveport, you’ll notice south of town an absolutely stunning number of natural gas wells. That’s the Haynesville Shale. But with natural gas prices being extremely low right now – there is actually an oversupply of the stuff given the rapid growth of natural gas reserves due to the fracking boom – a great many of the Haynesville Shale wells are shut in at present. Shut-in wells mean landowners aren’t getting royalty payments.

But when some $30 billion in gas-to-liquids refineries get built and go live, which is what you get when Sasol and Shell are completed, there will be a major increase in the demand for Haynesville Shale gas (and gas from other sources as well). And that means a lot of those shut-in wells get opened, and the royalty checks start to flow again.

This is big news.

It’s huge news for Jindal and his economic development secretary Stephen Moret. Moret is especially giddy today, and he’s not alone…

“This project, if built as planned, will have a profoundly huge impact on Louisiana’s economy,” says LED Secretary Stephen Moret. “GTL could be the dawn of a new industry in the U.S. and the two leaders of the industry—Sasol and Shell— have chosen Louisiana.”

Like Sasol’s previously announced GTL complex planned for Westlake, Shell’s facility near Sorrento—which would turn natural gas into conventional fuels like clean-burning diesel, jet fuel and oil-based lubricants—will be massive in its size and scope. The project, should it come to fruition, would have an estimated economic impact of $77.6 billion, according to an economic impact study by LSU, and would mean the creation of 10,000 construction jobs as well as 750 or so permanent jobs with an average salary of $100,000.

“This is a fantastic opportunity for our graduates to be able to work for one of the premiere companies in the world and stay in the state,” says Dean Richard Koubek of the LSU College of Engineering. “We are one of the fastest growing engineering colleges in the nation but we are going to have to keep that going in order to make sure we produce enough graduates to fill those positions.”

Of course, Shell has taken two years just to make the announcement that they’d selected the Sorrento site from the word starting to leak out that they were interested in getting the project off the ground. It’s possible that they ultimately pull the plug and don’t build the plant. But if nothing else the state will get a free $32 million in free infrastructure from the oil company in the event they don’t go through with the plans.

That $32 million commitment seems like a good indication this thing will happen. Together with the rest of the energy-sector and petrochemical economic development projects which have gone up on the drawing board in recent vintage it’s a good bet that the construction and manufacturing sectors will be major drivers of the state’s economy in the next few years.

That’s good for Jindal, it’s terrific for the state and it’s going to change Louisiana’s demographics in substantial ways in the coming years as natives get some of the direct and indirect jobs in this expanding industry and new arrivals get the rest.