Qatar Petroleum and Shell said they had decided not to proceed with their $6.4 billion Al Karaana petrochemical project in the Gulf state, the region’s second big energy project to be shelved since oil prices began to plunge late last year.
Prices quoted by contractors to build the huge complex showed the project was “commercially unfeasible, particularly in the current economic climate prevailing in the energy industry”, the two companies said in a joint statement on Wednesday.
State-owned Qatar Petroleum and Shell had agreed on the project in December 2011; they were to build a petrochemical complex in the Ras Laffan Industrial City, with the Qatari company owning 80 per cent and Shell 20 per cent.
The Al Karaana project had appeared to face delays even before oil prices started to tumble. Requests for banks to help finance it were due to be sent out by the end of the first quarter last year, but this did not happen.
That suggests the oil price tumble may be prompting companies formally to shelve projects that were in any case looking uncertain because of changes in the industry and shifting demand projections.
Early this month, industry sources told Reuters that Saudi Arabia’s state oil giant Saudi Aramco had suspended plans to build a $2 billion clean fuels plant at its largest oil refinery in Ras Tanura.
Many other multi-billion dollar projects in the region are still going ahead, however, including the Sadara joint venture petrochemical complex of Aramco and Dow Chemical, which has an estimated value of around $20 billion.
Existing partnerships between Qatar Petroleum and Shell include Pearl GTL, the world’s largest integrated gas-to-liquids plant, located at Ras Laffan in the Gulf state.