According to Marcellus Drilling News, Shell and PTT Global ethane crackers will be built in western Pennsylvania and eastern Ohio, respectively. The tougher-to-answer question is “when?”
That depends somewhat on how fast methane prices recover. As that happens, farmers and landowners who have sold their Marcellus and Utica natural gas rights stand to gain.
Marcellus/Utica gas lease holders to gain from 2 ethane crackers
While ethane is not methane, it’s a higher-value liquid that comes up with natural gas from many shale wells in western Pennsylvania, northern West Virginia and eastern Ohio. It converts to ethylene and polyethylene, the building blocks of many common plastic products. And, some of the pipelines now going in across Pennsylvania are designed to carry it to Philadelphia ports for export.
Royal Dutch Shell already has spent two years and a half-billion dollars on preparing the former Horsehead Holdings zinc smelter site in Beaver County, Pa., for construction. But a company spokesperson says a final “build” decision hasn’t been made yet, due to capital spending slashes resulting from lower oil and gas revenues. But Marcellus Drilling News Editor Jim Willis says, “It doesn’t take a genius to connect the dots with that project.”
Farther down the Ohio River in Belmont County, Ohio, PTT Global Chemical is spending upward of $200 million to dig into the feasibility of building another ethane cracker at a shuttered power plant across the river from Moundsville, W.Va., adds Willis. And Consol Energy CEO Nick Deluliis recently predicted that both petrochemical facilities will be built within the decade.
Some 50% of the demand for ethylene and plastics is within 500 miles radius of this region, notes DeIuliis. Further, he says that the biggest concern of whether to build on the Marcellus/Utica play has been answered. Ethane production soared with the shale boom, so much so that ethane prices have been depressed by oversupply.
The U.S. Department of Energy’s Energy Information Administration now predicts domestic ethane production would grow another 27% through 2017 and investment in pipelines and petrochemical plants to use the liquid would increase.
“These projects increase take-away capacity for ethane, especially in the Marcellus and Utica shale regions, mainly in Pennsylvania, Ohio, and West Virginia, where market outlets for rapidly growing natural gas supply were previously limited,” the agency said.
Consol has a deal to supply Shell with ethane if it builds. And, Shell, Range Resources and Rex Energy are putting ethane on pipelines such as Sunoco Logistics' Mariner East line to the Philadelphia area, where it's being exported to Europe for cracking.
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