Northeast natural gas supply ample for more petrochemical plants
There is enough ethane being produced in the Northeast U.S. now to provide the chemical industry sufficient feedstock without any additional drilling or exploitation, industry analysts said.
“There is more than enough ethane in the Northeast region now for another two to three world scale crackers,” U.S. Energy Information Administration Industry Economist Warren Wilczewski said while speaking at Petrochemical Update’s Northeast U.S. Petrochemical Construction Conference.
Shell’s $6 billion ethane cracker in Beaver County, Pennsylvania could be the first of many, he added.
Shell Chemical will build a major petrochemicals complex near Pittsburgh which will include an ethane cracker and a 1.6 million/tonne year polyethylene plant. Main construction will start by the fourth quarter of 2017, with commercial production expected to begin early in the next decade.
Model of Shell's world scale cracker to be built in Pennsylvania. Photo: Alexander Morozov
Meanwhile, the U.S. subsidiary of PTT Global Chemical (PTTGC America) has selected a site along the Ohio River for the possible construction of a world-scale 700,000 tonne/year ethane cracker.
PTTGC America exercised a purchase option on the 168-acre property in Belmont County, Ohio in July, and is due to make a final investment decision at the end of 2017.
The EIA tracks many hydrocarbon gas liquids (HGL) including natural gas, natural gas liquids (NGLs) such as ethane, propane, butane, and methane; also, olefins including ethylene, propylene and butadiene.
In the northeast quad state Appalachia area of Pennsylvania, Ohio, Kentucky and West Virginia, production of NGLs has grown almost 10-fold over the past four years, but it could have been even higher, according to Wilczewski.
The local market for HGLs are limited, and much of what is being produced in the region is shipped via rail.
“Propane and heavier HGLs are finding multiple outlets, including in-region markets by rail to other U.S. regions and Canada, and exports overseas because of rail capacity development,” Wilczewski said.
But pipeline-restricted ethane has been stranded in the region, with few outlets to market, he said.
The region is exporting its ethane to Canada, the U.S. Gulf Coast and Europe.
Whatever ethane is not sold is rejected or mixed in with the natural gas that supplies homes and businesses for heating and cooking.
“Propane demand is seasonal, and insufficient local storage capacity means outside heating season propane is shipped out for storage,” Wilczewski said. “Butane demand is also seasonal, with summer butane production shipped out of the region.”
If all the rejected ethane could be used to make plastic instead, the region would have more than enough for several big chemical plants without an increase in drilling activity, Wilczewski said.
At least 150,000 barrels/day of ethane are currently being rejected in the Appalachia region, according to the American Chemistry Council (ACC).
Factor in drilling
U.S. natural gas production continues to rise especially in the northeast region, according to the EIA.
The EIA projects that the U.S. will become a net exporter of natural gas on average in 2017, with net exports expected to average 0.4 BcF/day. As LNG exports increase, 2018 net exports are forecast to be 1.3 BcF/d.
“Increased natural gas production in the region could yield an additional 1.1 to 1.3 billion barrels/day of NGL by 2022, said Martha Moore, Senior Director of Economics and Policy Analysis at the ACC.
The resulting surplus ethane of up to 350,000 barrels/day could support up to five crackers, according to research from West Virginia University.
Beyond providing feedstocks for new facilities in the Northeast, there is sufficient raw material to export to overseas destinations.
U.S. as exporter
While the early petrochemical mega projects focused on moving product to existing demand centers; primarily petrochemical consumers in Canada, Gulf Coast, and overseas, U.S. ethane exports could give new lease on life to older petrochemical facilities overseas, primarily in Europe, Wilczewski said.
“There are projects using U.S. ethane overseas and many other plants that could use U.S. ethane. They all have the capacity to receive vessels,” he said.
“We estimate there are at least 140,000 barrels of demand that could be satisfied with northeast supplied ethane in Northern Europe, and another 82,000 in Southern Europe if you take the crackers that are using light feedstock and assume they switch over to U.S. sourced ethane,” Wilczewski added.
The American Chemistry Council (ACC) has been tracking new petrochemical project announcements motivated by the shale advantage since 2010 and their database now lists 310 projects valued at $185 billion.
“This is the equivalent of 40% of the replacement value for the entire U.S. chemical industry stock,” Moore said.
More than 60% of those projects are foreign-owned or include a foreign partner, Moore said.
The U.S. produces 25% of all the world’s NGLs, and more than 25% of the U.S. supply comes from the Northeast, according to the ACC.
Most of the projects since 2010 have been built along the U.S. Gulf Coast, but growing the Appalachia region is an opportunity to strengthen the U.S. economy by providing employment and supply diversity, Moore said.
“The advantages for the Appalachia chemicals and plastics industry are huge. The area has proximity to abundant NGL resources in the Marcellus/Utica and Rogersville shales,” Moore said.
“The region also has proximity to manufacturing markets in the Midwest and along the East Coast, and Canada.”
The ACC recently published a hypothetical scenario of economic advantages in the Appalachia region assuming the expected 350,000-400,000 barrels/day of ethane are available by 2025.
The scenario also assumes storage and pipeline infrastructure is built like Mt Belvieu in Gulf Coast.
The result would be $35.8 billion in new chemicals and plastics industry investment: including five ethane crackers, two propane dehydrogenation (PDH) units, downstream polyethylene, polypropylene and other derivative facilities, plastics compounding plants, and plastic products manufacturing.
Image Source: ACC
“Once these facilities are up and running that would mean $28.4 billion in new output by 2025,” Moore said.
The investment would result in 25,000 direct jobs, 45,000 indirect jobs and another 32,000 payroll induced jobs for a total of more than 100,000 newly created jobs in the region and payrolls of more than $6 billion, she added.
By Heather Doyle