M: Business 3rd Edition by O. C. Ferrell, Geoffrey Hirt, Linda Ferrell

Exercise 1

Royal Dutch Shell PLC has partnered with Qatar (a country in the Middle East) to create a $19 billion refinery that may bring the company to the forefront of sustainability. The plant, Pearl GTL (gas-to-liquids), is designed to transform natural gas into odorfree, pollutant-free fuel. The venture, which is the largest GTL project to date, has the potential for high returns in a flooded natural gas market. More importantly, the development of a new transformation process has the potential to create a new natural gas.

 Shell has been working with GTL for almost four decades and believes it can succeed with Pearl. Lower natural gas prices will likely spur demand, particularly as GTL fuel is roughly half the cost of crude oil. GTL fuel is also purer than traditional crude, appealing to more environmentally conscious consumers and businesses.

 Yet despite the benefits of GTL fuel, some have criticized the process. For instance, the GTL process is extremely expensive. Critics feel that alternative procedures are more cost-effective. In addition, the GTL process consumes a great deal of energy, calling into question the effectiveness of its environmental sustainability. Others argue that GTL is profitable only when oil prices are high and that Shell has an equal chance of winning or losing on the venture.

 However, Shell is optimistic. Not only does it feel that Pearl will pay itself off in five years, but it also has the added bonus of experience. Shell has operated a smaller GTL plant in Malaysia since 1993 and has already worked through many of the glitches in the GTL process. Finally, Qatar is rich in labor and energy reserves; if this partnership proves fruitful, Shell may have access to more profitable relationships in the future. Creating a more sustainable future for energy products can be a significant contribution to society.

 Why is the development of the new transformation process GTL (gas-to-liquids) so important?

Step 1 of 2

The GTL technology converts the natural gas into liquids, is developed with the aim to contribute to clean energy production process in future. The process plays a significant role in turning the abundance of natural gas into a secured long term supply of energy. Since the process is capital intensive, is has a complicate structure.