A plan by Royal Dutch Shell plc (ADR)(NYSE:RDS.A) to shut down a gasoline-producing facility located in Convent, Louisiana has been shelved. Instead Shell will overhaul the plant and have the life of the facility extended by between four and five years.
“Shell re-evaluated the cat cracker end-to-end economics and determined that the business case was strong to run the FCCU (fluid catalytic cracking unit) for another cycle,” a spokesperson for Royal Dutch Shell, Ray Fisher, said.
Decommissioning of the plant had been planned for early next year as Shell intended to have the Convent plant integrated through a pipeline network with another refinery it owns and which is located in Norco, Louisiana.
The plan to integrate the two facilities was mooted three years ago. At the time they belonged to Motiva Enterprises, a firm which was jointly owned by Saudi Arabia’s state oil firm, Aramco and Royal Dutch on a 50-50 basis until May 1 this tear. Once the partnership ended, the two plants in the States of Louisiana went into the ownership of Shell. Part of the reason for shutting down the facility was the fact that it had become unprofitable.
With Shell now planning to have the plant keep operating, no layoffs are expected. In St. James Parish, the facility is a major player according to the president of the Parish, Timmy Roussel. According to sources even more workers are likely to be hired even when the facility is decommissioned.
Shell’s abandonment of a plant to shut down the Convent facility comes in the wake of the Anglo-Dutch oil giant beating estimates after announcing a 47% rise in profits in the third quarter. This has been attributed to an uptick in the price of oil as well as a fall in costs after a three-year downturn in the sector.
Net profit for the quarter came in at $4.1 billion against estimates of $3.6 billion. In last year’s third quarter the net profit was $2.8 billion. During the quarter the average price of Brent crude was $52 a barrel and this was 13% higher compared to the same quarter one year ago.
Among the cost cutting measures Shell was the disposal of assets in Gabon and UK’s North sea at a price of $4.4 billion. This has ease Shell’s financial strain following the oil major’s move to acquire BG Group in 2016.
On Friday shares of Royal Dutch Shell plc fell by 0.19% to close at $64.10.