07 June 2011 01:10 [Source: ICIS news]
(adds updates throughout)
By Stephen Burns
COLORADO SPRINGS, Colorado (ICIS)--Shell could go it alone on any polyethylene (PE) component of its plan for a cracker project in the US, but it would also contemplate teaming up with another company, an executive said on Monday.
"Partnering is one of the things we would have to consider" for a PE side of the project, said Ben van Beurden, the Anglo-Dutch energy company's executive vice president for chemicals.
The cracker plan is being driven by the US advantage in relatively cheaper feedstocks because of swelling production of ethane from shale gas, especially from the Marcellus shale formation in the northeast.
The big picture is that the US will be a "significant" PE exporter in years ahead, van Beurden said on the sidelines of the American Chemistry Council (ACC) annual meeting in Colorado Springs, Colorado.
But the cracker plan itself is based on expectations for domestic demand in the US northeast.
Although no location has been decided yet, the region under consideration would be within a couple of hundred miles of "a tremendous amount of polyethylene demand, with good growth in it," van Beurden said.
Logically, growth in US PE exports would come from the US Gulf rather than the northeast, he said.
Decisions on the derivative slate for the new cracker would likely not be made until late this year or early in 2012, van Beurden said.
Shell did not give out much detail about the project when it announced it earlier on Monday.
Van Beurden likewise would not be drawn on a cost or exact size of the project, but he acknowledged that any "world-scale" cracker being built now would produce around 1m tonnes/year of ethylene, and would carry a multi-billion-dollar price tag.
The company began talks last week with local governments in Pennsylvania and West Virginia states, he said.
It would consider both a so-called greenfield site, or redeveloping an existing industrial location.
Shell's project is the latest in a series of announcements from companies looking at the potential to build a cracker in the US to cash in on the shale gas boom.
ExxonMobil has stood apart by ruling out any new capacity, instead saying it would concentrate on incremental growth at existing facilities.
Van Beurden acknowledged that not all the projects associated with the shale boom might proceed, but rejected the idea that speed of action would be the deciding factor.
"I don't want to characterise it as a race," he said.
While it would be presumptuous to predict what might happen, "our project makes the most sense" because of the upstream capabilities at Shell, which has a strong gas business, he said.
Van Beurden declined to discuss the potential regulatory risk for the proposed investment related to oversight of the hydraulic fracturing process - known as fracking - that unlocks the gas from the shale.
He conceded that there is a public perception about fracking that needs to be managed, though.
Many environmental groups are staunchly opposed to fracking, saying that the chemicals used in the process - such as benzene - are polluting underground water sources.
The US chemical industry has opposed suggestions that federal agencies should oversee fracking, arguing that individual US states should continue to have regulatory control.
The ACC meeting started on Monday and ends on Wednesday.
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