19 August 2011 19:39 [Source: ICIS news]
By Brian Ford
Shell announced in June it was developing plans for a world scale ethylene production facility with integrated derivative units in the Appalachian region of the US, to take advantage of the area’s Marcellus shale gas reserves.
“Selection of the site for the cracker and derivative units would be determined in the next phase of this project,” Anglo-Dutch Shell said in a statement.
“Building an ethane-fed cracker in Appalachia would unlock significant gas production in the Marcellus region by providing a local outlet for the ethane,” said Ben van Beurden, Shell executive vice president for chemicals. “This fits well with our strategy to strengthen our chemicals feedstock advantage and would be another step in growing our chemicals business to meet the increasing demand for petrochemicals.”
Shell said it was evaluating derivatives production with polyethylene (PE) as its top choice. Shell could go it alone on the polyethylene component or could team up with another company for that unit.
Other producers have made statements regarding expanding US Gulf Coast plants to make use of various shale plays.
West Virginia, Ohio and Pennsylvania sit on the Marcellus reserves and are regarded as top candidates for a new cracker.
West Virginia governor Earl Tomblin announced in February the formation of a Marcellus to Manufacturing Task Force to explore the development of crackers to revitalize the state’s chemical and manufacturing facilities.
Task force member Kevin DiGregorio, executive director of The Chemical Alliance Zone of West Virginia, said, “It is obviously a really big deal. West Virginia is a prime location for crackers.”
Task force members argue it makes more economic sense to build one or more crackers near the Marcellus shale play than it does to pipe the ethane to the Gulf coast.
US-based producer and pipeline company El Paso and natural gas infrastructure company Spectra Energy have formed a joint venture to build the Marcellus Ethane Pipeline System (MEPS), which would transfer 60,000-90,000 bbl/day of ethane to the US Gulf coast from the Marcellus reserves, but industry analysts have questioned the economic viability of the project.
One new cracker could create at least 250-500 permanent jobs and thousands of temporary construction jobs, DiGregorio said. He estimated that each $1bn (€700m) cracker investment would result in an additional billion-dollar investment in downstream units.
West Virginia could serve as the hub of a five-state region for downstream manufacturing, DiGregorio said.
According to a report by the American Chemistry Council (ACC), a 25% increase in ethane production in the US as a result of shale gas development could generate 17,000 high-paying chemical industry jobs, 395,000 additional jobs outside the chemical industry, $4.4bn more in taxes and a $32.8bn increase in US chemical production.
Bayer said in December it was exploring the idea of potential investors using one of its sites in West Virginia for a cracker using feedstock from the Marcellus shale. The sites include New Martinsville, with about 1,000 acres (405 ha), and Institute, with about 460 acres.
Pennsylvania and Ohio government officials also have voiced interest in getting more value out of natural gas liquids from shale, including ethane.
A shale gas advisory panel for Pennsylvania Governor Tom Corbett recommended in July that a “comprehensive evaluation of Pennsylvania’s competitive business climate should be conducted to ensure that the Commonwealth is best positioned to attract private investment capital and maximise downstream natural gas use, such as in chemical manufacturing, plastics and other uses”.
Meanwhile, Ohio Governor John Kasich said in July he was “simply thrilled” over an announcement by Chesapeake Energy regarding large amounts of recoverable natural gas and other hydrocarbons from shale deposits in eastern Ohio.
“Just as I’m excited about the direct benefit that can come from production-related jobs, I’m also excited about the potential for jobs at pipeline and processing facilities”, Kasich said.
Jack Lafield, president and CEO of West Virginia-based natural gas gathering and processing company Caiman Energy, noted that the ultimate drivers of the location of a cracker will be the investing producers, not the states.
“The real key to be successful is you’ve got to build more than just the cracker unit – you really got to come up here and build all the ancillary product facilities. Now I can make plastics and other products actually close to the market,” Lafield said.
“West Virginia has become quite a spot that would allow some of these big boys to carry out a full market plan,” he added.
Industry observers note that infrastructure and other hurdles lay ahead of any such project – such as development of adequate natural gas fractionation capacity.
($1 = €0.70)
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