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Northeast storage hub approval could accelerate petrochemical growth
Shell’s investment in a world scale ethane cracker in Pennsylvania is paving the way for a major Appalachia petrochemical industry and a proposed underground storage system could spur additional investment in the region, analysts told Petrochemical Update.
The development of shale resources in the U.S. has led to more than 300 petrochemical projects with a cumulative investment of $181 billion, according to the American Chemistry Council (ACC). While most of that investment is in the U.S. Gulf, more than $16 billion has been announced in the Appalachia Region along the Ohio River, which consists of a quad state area: Ohio, Kentucky, West Virginia and Pennsylvania and utilizes resources from the Marcellus/Utica and Rogersville shales.
“The Appalachia region has distinct benefits that could make it a major petrochemical and plastic resin-producing zone,” ACC President Cal Dooley said. “Proximity to a world-class supply of raw materials from the Marcellus/Utica and Rogersville shale formations and to the manufacturing markets of the Midwest and East Coast has already led several companies to announce investment projects, and there is potential for a great deal more.”
Shell Chemical will build a major petrochemicals complex near Pittsburgh which will include an ethane cracker and a 1.6 million/tonne year polyethylene (PE) plant. Main construction will start by the fourth quarter of 2017, with commercial production expected to begin early in the next decade.
PTT Global Chemicals is due to make a final investment decision at the end of 2017 to build a 700,000 tonne/year ethane cracker on the Ohio state line.
“I believe the Shell investment sends a strong signal that this is a good place for investment for the same reasons Shell chose Pennsylvania: cheap and abundant ethane, proximity to their end customers and a supportive business climate, which are the same things we will be touting to other companies as we encourage them to invest here,” said David Ruppersberger, President of the Pittsburgh Regional Alliance.
Crucial Next Step
According to analysts, a storage solution is a crucial next step in transforming the Appalachian Basin and its natural gas assets into a petrochemical production center.
“The Appalachian Storage Hub is necessary to maximize the potential of the raw materials present in the Marcellus, Utica and Rogersville Shales,” MATRIC Chief Executive Steve Hedrick said. MATRIC is the Mid-Atlantic Technology, Research & Innovation Center in South Charleston, West Virginia that has been nationally vocal on the infrastructure improvements required for the Appalachian Storage Hub.
“Further, infrastructure beyond the storage facility itself will include significant pipeline infrastructure to support the distribution of key raw materials and intermediates, including but not limited to methane, ethane, ethylene, propane, propylene and chlorine. All are building blocks for further manufacturing opportunities that may be realized in the Ohio River and Kanawha River Valleys.”
The Hub would handle some 100 million barrels of natural gas liquids (NGLs) and liquid chemicals, and include about 3,000 miles of underground pipelines to move the chemicals to industries along a 454-mile corridor in the four states. The cost of the Hub would be around $10 billion according to TopLine Analytics.
The concept would be similar to the Mont Belvieu hub in Texas that supports the Gulf Coast chemical industry.
“The hub in and of itself is built-for-purpose underground storage facilities, which may be accomplished safely in naturally occurring salt strata or limestone,” said Hedrick.
Dooley along with Senators Joe Manchin and Shelley Moore Capito of West Virginia and Rob Portman of Ohio introduced The Appalachian Ethane Storage Hub Study Act at a Capitol Hill press event in May.
Storage Hub Impact
The ACC presented a hypothetical scenario that includes the development of a storage hub for NGLs and chemicals, a 500-mile pipeline distribution network and associated petrochemical, plastics and potentially other energy infrastructure and manufacturing in the quad-state area in a report released in May.
The economic benefits could be substantial. By 2025, the quad-state region could see 100,000 permanent new jobs, including 25,700 new chemical and plastic products manufacturing jobs, 43,000 jobs in supplier industries and 32,000 ‘payroll-induced’ jobs in communities where workers spend their wages, according the report. The new investment could also lead to $2.9 billion in new federal, state and local tax revenue annually.
“The right policies are critical to realizing this opportunity,” Dooley said. “The Appalachian Ethane Storage Hub Study Act of 2017 is an important step forward. It will help inform efforts to maximize America’s domestic energy and manufacturing potential.”
The Shell site is on a former zinc smelter which sits along the Ohio River. Shell bought the 300 acre facility for $13.5 billion in June 2015 and later acquired an additional 700 acres nearby.
Shell's Petrochemical Complex will be built on the banks of the Ohio River in Potter Township, Beaver County, about 30 miles north-west of Pittsburgh and close to NGL feedstock supply. More than 70% of North American polyethylene customers are within a 700-mile radius of Pittsburgh. Photo: Pittsburgh Regional Alliance
Infrastructure changes have already been completed to prepare for Appalachia petrochemical growth and peak construction at Shell. Route 18 was moved closer to the facility and an interchange was built onto the interstate to keep construction traffic away from county traffic. In addition, CSX Rail moved its main rail line closer to the facility, Ruppersberger explained.
“Shell's investment is clearly an affirming decision with regards to their independent validation of the resource availability in the Appalachian Basin,” Hedrick said. “Major construction efforts increase the density of resources available for that heavy construction, such as civil engineers, process engineers and the construction trades. Once deployed into the geography, those resources may be redeployed rapidly with the region to new, adjacent construction sites.”
Appalachia Shale Supply
The region can support more petrochemical investment, according to analysts. While the Marcellus was not producing enough to even supply Shell back in 2010 when discussions started, the abundant ethane and propane supply from the Appalachian region now could feed at least five additional world scale ethylene complexes and a handful of propylene dehydrogenation and polypropylene facilities, according to the ACC.
“We are looking for multiple crackers, multiple other petrochemical facilities that maybe rely on propane, methane and other feedstocks integrated with the infrastructure that is required to support that,” Ruppersberger said. “We don’t want to see Shell as a one off. We believe there is greater opportunity for the region.”
By Heather Doyle