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Shell Firms-up Interest in New US Capacity

Business, China, Company Strategy, Economics, Fibre Intermediates, Olefins, Polyolefins, US
By John Richardson on 07-Jun-2011

By Malini Hariharan

Shell Chemicals has become the latest entrant to a steadily growing list of companies looking at new cracker investments in the US.

As we wrote about last week, Shell Chemicals told us in an interview at the Asia Petrochemical Industry Conference (APIC) in Fukuoka, Japan, that it was evaluating brown and greenfield expansions in North America. Parent company Shell has 700,000 acres of shale gas reserves in the US and Canada.

Ben van Beurden, Executive Vice President Chemicals, went further in an interview with ICIS news earlier on 6 June, when he disclosed plans for a worldscale ethane cracker with integrated derivative units in the Appalachian region of the US. This would to take advantage of the area’s Marcellus shale gas reserves

The cracker is likely to have a capacity of at least 1m tonnes/year of ethylene. The location has yet to be firmed-up, but the company has started talks with local governments in Pennsylvania and West Virginia and is evaluating greenfield and brownfield sites.

What will Shell Chemicals do with all the ethylene? Monoethylene glycol (MEG) is the company’s core business and the industry urgently needs new plants to keep up with demand growth in Asia.

In the same interview at APIC, Shell Chemicals told the blog of its intention to build two worldscale MEG plants downstream of its Qatar cracker project.

The company did not confirm plans for MEG in the US but instead disclosed that PE, a business that it exited many years back, is a leading option.

Most of the PE production would be used by northeastern US industries.

“Demand for PE in North America is expected to grow, so the economic and efficiency benefits of a regional cracker make this configuration attractive,” the company added.

Partnering is one of the things we would have to consider,” for the PE side of the project, added van Beurden.

Decisions on the derivative slate are likely to be made end of the year or in 2012.

Shell Chemicals has joined Chevron Philip Chemical, Dow Chemical, LyondellBasell and others evaluating major cracker investments in the US.

The opportunities flowing out of shale gas are hard to ignore but as highlighted by the blog earlier, environmental issues relating to fracking have yet to be resolved. Public perception on environmental issues has to be managed and this is not going to be an easy task despite all the promise of economic benefits.

Some of the cracker projects may fall by the wayside but at least on paper the US is well on its way to becoming the new Middle East of the petrochemicals world.