Northeast could be second US chemicals hub
While news headlines for the petrochemical construction boom have mainly been focused on the U.S. Gulf Coast, there are plenty of projects in the U.S. Northeast for the next wave of building.
There are more than $5.7 billion worth of chemical projects that are nearing or under construction in the U.S. Northeast and New England regions, according to Industrial Information Resources (Industrial Info).
There is more than $90 billion in planned projects and development for the region.
In the northeast, three key projects dominate the spotlight, in addition to the development of an underground storage system that could attract additional investment.
Shell’s $6 billion ethane cracker in Beaver County, Pennsylvania could be the first of many world scale chemical complexes that will use low-cost ethane from shale gas producers in the Marcellus and Utica basins, according to analysts.
Shell Chemical Appalachia has started construction on its chemicals complex comprising an ethylene cracker with polyethylene (PE) derivatives unit, near Pittsburgh, Pennsylvania.
The facility will be built on the banks of the Ohio River in Potter Township, Beaver County, about 30 miles north-west of Pittsburgh.
While a final investment decision is not yet on the table for PTT’s planned Belmont County ethane cracker in Ohio, recent comany announcements have been positive signs for this project.
PTT officials have publicly cited that a decision will be made on its $7-10 billion investment before year end. Initially, the estimated cost of the cracker plant to be built along the Ohio River was $5.7 billion.
South Korea’s Daelim Chemical is now a partner on the ethane cracker project.
Ohio Governor John Kasich said the international energy firms now control about 500 acres of property needed to build the cracker.
PTT previously bought a 168-acre parcel overlooking the Ohio River in Dillies Bottom, an unincorporated area in Belmont County, Ohio across the Ohio River from Wheeling, West Virginia. The land was purchased from FirstEnergy Corp for $13.8 million.
China Energy Investment Corporation Limited's plans to invest $83.7 billion in shale gas development and chemical manufacturing projects in West Virginia, the West Virginia Department of Commerce said.
West Virginia Secretary of Commerce H. Wood Thrasher and China Energy President Ling Wen signed a Memorandum of Understanding (MOU) in November between China Energy and the state of West Virginia as part of the US-China Business Exchange trade mission to enhance relations between the two countries.
Planning for the projects is underway and will proceed in phases over the course of 20 years. The projects will focus on power generation, chemical manufacturing, and underground storage of natural gas liquids and derivatives.
"Expanding Appalachia's energy infrastructure, including developing a regional storage hub and market for natural gas liquids, will have a transformative effect on our economy, our security, and our future. From driving growth and creating jobs to maximizing America's energy potential, the benefits for West Virginia and the country from this new investment will be significant and long-lasting," Senator Shelley Moore Capitol said in a statement.
China Energy is the creation of a merger between China's state-owned coal mining company Shenhua Group and energy producer Guodian Group. The merger positions China Energy as the world's largest power company with more than 200,000 employees.
Projects in the northeast will be located close to ethane supplies and gas processing infrastructure in the heart of the “wet” Marcellus/Utica natural gas liquids production region, which will provide a significant feedstock transport cost advantage versus Gulf Coast crackers, even if ethane prices rise in the next few years.
The proximity to the end user market is another advantage. More than 70% of North American plastics customers are within a 700-mile radius of Pittsburgh.
According to the EIA, northeast region natural gas production at 20 billion cubic feet (BCF) per day in 2017 is expected to double in the next 35 years, accounting for 40% of total U.S. natural gas production.
EIA forecasts dry natural gas production in the eastern region of the U.S. to grow by a third between 2015 and 2025.
Tri State Strength
In IIR’s tracking of the installed base capacity for 12 industry sectors, PA ranked # 4 among the 50 states.
Ranking as the 6th largest producer of chemicals in the U.S., Ohio has over 43,500 direct jobs in the chemical industry; another 59,000 related jobs; and 56,000 jobs in plastic and rubber products.
Ohio is currently the #1 plastics producer in the U.S. with a dense concentration of plastic and rubber processors, who are in turn supported by molded toolmakers, machinery manufacturers, resin compounders and distributors that ship over $6.5 billion/year in products globally.
Chemical and polymer manufacturing in West Virginia is home to nearly 140 companies that employ 12,800 workers. The state is ranked 6th in the share of overall gross domestic product that comes from chemicals and polymers. Nearly 25% of the state’s $4.8 billion in international exports are chemicals and polymers.
Pennsylvania Governor Tom Wolf announced in March the extension of a three-state agreement with Governor Jim Justice of West Virginia and Governor John Kasich of Ohio to collaborate on efforts to maximize the use of the shared natural gas resources in the Appalachian Basin.
The Tri-State Shale Coalition, originally formed in October 2015, is dedicated to workforce development, infrastructure, innovation, and marketing.
“The shale gas resources in the Appalachian Basin represent enormous economic opportunity not just for Pennsylvania, but for the region as a whole,” Governor Wolf said. “We have a unique proposition: abundant and low-cost feedstock for petrochemical and plastics manufacturing, all within the same geographic footprint.”
After years of competing against one another to land large petrochemical projects, Pennsylvania, West Virginia and Ohio now host annual summits to share best practices around economic development.
“The framework around the tri-State shale initiative is important,” said Denise Brinley, special assistant to the secretary for strategic industry initiatives at the Pennsylvania Department of Community and Economic Development. “We don’t want to be in a position where we’re each out for our own so to speak. We understand that for the region to grow, a rising tide raises all ships - so we are working collaboratively.”
As part of the agreement, the states work together to support infrastructure, such as pipelines, railroads, and roadways, that are critical for shipping natural gas and related products.
In addition, they encourage state-supported universities to collaborate on research to find end uses for natural gas products.
“The MOU lays some framework for the three states to work together - jointly marketing the region and collaborating on the various things like workforce development,” Brinley said. “Despite the fact that we have a cracker in Pennsylvania, the construction of that plant will draw from a regional base of construction workers, just like if Ohio is successful in landing PTT Global Chemicals, they will also need a fairly substantial influx of construction workers to build that plant.”
By Heather Doyle