US Shale Gas: The Truth Versus Perception


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By John Richardson

SINCE when has the truth mattered in the battle between environmentalists and the oil, gas and chemicals industries?

This is a game of perception on both sides as estimates of risk are heavily subject to data that is either biased in the way it is collected or how it is interpreted.

And so the environmental evidence being stacked-up to support further growth in US shale-gas production – crucial to the competitiveness of the country’s petrochemicals industry – might not matter a jot of if a major pollution incident occurs.

According to energy industry-backed websites such as this – the “fracking” process has been practised without groundwater pollution in Texas for the past 60 years. The only pollution of drinking water that has occurred has been caused by the secondary recovery process, different from fracking, where water is injected into depleted oil and gas wells.

The energy industry also argues that the bulk of chemicals used in the fracking process in the giant Marcellus Shelf are very small in volume and of the type used in disinfectant, cosmetics and even pharmaceutical production.

Benzene, toluene, ethlybennzene, xylenes and naphthalene can also be used in fracking, but these much-more toxic chemicals are not as economic.

There is also environmental pressure, though, over the large amount of sometimes short-in-supply water used in the fracking processThe debate around shale gas seems sure to intensify now that reserves, production, and perhaps therefore the chance of an accident, are on the increase.

In its annual report released this month , the US Energy Information Authority (EIA) estimates that as of 1 January 2009, the US’s technically recoverable shale-gas reserves had more than doubled compared with a year earlier.

Ethane production in the States is set to increase by 30% over the next two years to 850,000 bbl/day, according to industry estimates reported by our colleagues at ICIS news.

This implies that the feared lack of fractionation capacity will not hold the growth of ethane supply back, thanks to drill-to-earn provisions.

But, as we have said, the public mood towards shale gas could turn decidedly negative if there is an accident.

Attitudes towards the industry have recently improved, however, according to Sven Royall, Vice-President for Intermediates at Shell Chemicals.

“Four -to five months ago (after Deepwater Horizon) I would have said that the regulatory outlook looked a lot bleaker for shale gas, but it has since got better,” Royall told the blog in a recent interview.

“Preventing groundwater pollution is about making sure that cementing and casing is right because the actual shale gas extraction takes place beneath aquifers.”

His colleague Iain Lo, who is Shell Chemicals’ Vice-President New Business Development and Ventures, said that he had no concerns about operating reliability when it came to the bigger, more experienced shale gas operators.

“There could be issues with the smaller players, however,” he warned.

The other threat to projections of ever-improving economics for US ethane-based petrochemicals is an unexpected surge in natural-gas demand from other industries, such as power generation.

And as we have said before, talk of building a new ethane-based cracker in the US might well be premature given the state of the economy.

Current capacity would a first need to be maxed-out – although there could be further smaller opportunities to debottleneck and switch to lighter feedstocks.

Jim Galloghy, CEO of LyondellBasell, has said that it is too soon to talk about building a new cracker in the US. This is despite an initial economic assessment of doing so in the Appalachians.

But Royall interestingly added: “What you need is confidence about gas prices being at the right level for 25 years – the life of a project. This confidence is not quite there yet, but it is getting closer.”

The other opportunity now emerging is the rising value of propylene versus ethylene as a result of the big switch to cracking ethane away from naphtha.

Dow Chemical CEO Andrew Liveris talks about pushing more propane into the US major’s domestic feedstock mix in order to resolve the C3s shortage, in the same article we have just linked to immediately above.

The first option is to address the industry-wide propylene tightness would be to crack more propane in steam crackers,

Despite the technical difficulties that can beset the propane dehydrogenation-to-polypropylene (PP) proces – plus the need for guaranteed long-term low-cost propane supply – might we also see more of these units being proposed in the US?


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