Think tank: Shell's US cracker site selection raises questions

02 April 2012 00:00  [Source: ICB]

Anglo-Dutch energy and chemical giant Shell has identified a possible site for its proposed cracker in the Northeast US, but several key details about the project remain unclear, from feedstock prices to possible partners for developing downstream units.

Appalichia mountains, Rex Features

 © Rex Features

The Northeast US poses logistical challenges for chemical producers

Shell is evaluating a Pennsylvania site for a possible ethane cracker. It is also considering polyethylene (PE) and monoethylene glycol (MEG) units.

"I think Shell is taking a closer step to finalizing their plans to build a new cracker," said Peter Fasullo, a principle at US-based energy and petrochemical consultancy En*Vantage. However, the company still has issues it needs to resolve.

Shell is not in the PE business, so it may seek out a partner to build the unit, said Bob Bauman, president of US-based Polymer Consulting International. Shell discussed the possibility of a partner last year at the annual meeting of the American Chemistry Council (ACC).

Other questions concern the cost of the feedstock ethane.

The ethane in the Marcellus shale formation is stranded, but that will soon change as several projects come on line.

Canada-based NOVA Chemicals is converting its cracker in Corunna, Canada, so it can use ethane.

It has already locked in supply agreements to bring in ethane from the Marcellus via pipelines.

US natural gas processor Enterprise Products Partners is developing a pipeline that would connect the Marcellus to the US Gulf coast. The so-called Appalachia-to-Texas pipeline (ATEX Express), could carry up to 190,000 bbl/day of ethane.

US natural gas processor Markwest's Mariner East project would develop an ethane pipeline connecting the Marcellus to terminals on the east coast.

"I can see a lot of market competition for that Marcellus Shale [gas]," Fasullo said. "It won't be stranded ethane. It is not going to be cheap as some people thought it was going to be."

Shell will also need to address ethane storage, Fasullo said. If built, Shell's cracker would ultimately need to go down for maintenance. During that downtime, suppliers will continue to produce ethane, which will need to go somewhere.

That could be a problem in the Northeast US, given its minimal storage and cracking capacity, Fasullo said. "How is Shell going to handle the swings?"

But Fasullo noted that things can change quickly. "We can react so much quicker than the rest of the world. That's why we are seeing such aggressive activity by US petrochemical companies."

By: Al Greenwood
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