Shell cancels U.S. gas-to-liquids plant as costs rise

NEW YORK, Dec 5 (Reuters) - Royal Dutch Shell (Xetra: R6C1.DE - news) said on Thursday it has canceled a proposed gas-to-liquids (GTL (BSE: GTL.BO - news) ) plant in Louisiana as costs rose and the company reins in spending.

The project, which would have converted natural gas to gasoline and other refined products, was expected to cost more than $20 billion, a Shell (LSE: RDSB.L - news) spokeswoman said, far higher than the $12.5 billion price tag estimated in September.

Shell said that it was not certain that natural gas prices would remain sufficiently low to make such a project, which has proved a success in other parts of the world, viable in North America.

"Despite the ample supplies of natural gas in the area, the company has taken the decision that GTL is not a viable option for Shell in North America at this time," Shell said in a statement.

A glut of natural gas supplies in North America has widened the gap between oil and gas prices, prompting the first serious look at GTL technology in the United States.

South African energy firm Sasol (Other OTC: SASOF - news) is building a 96,000 barrel-per-day GTL plant in Westlake, Louisiana, which is expected to cost $11 billion-$14 billion.

But the price tag proved too high for Shell, which is slowing spending under its incoming chief executive Ben van Beurden. Shell recently canceled the $10 billion Arrow LNG project in Australia, potentially in favor of another project.