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Optimism Remains For Cracker

By Staff | Mar 14, 2012

BY CASEY JUNKINS

For The Wetzel Chronicle

A West Virginia oil and natural gas industry leader remains optimistic about the state’s chances of landing Royal Dutch Shell’s multibillion dollar ethane cracker, which he said could be destined for the northern panhandle.

Shell officials, who have said they plan to make a site announcement for the large petrochemical plant by the end of this month, also are considering sites in Ohio and Pennsylvania for cracker construction.

Some officials believe the site of the former FirstEnergy R.E. Burger power plant south of Shadyside may be prime for a cracker.

Corky DeMarco, executive director of the West Virginia Oil and Natural Gas Association, said he believes Shell is looking at a large parcel of land near New Martinsville now owned by Bayer Corp. and PPG Industries, as well as another site in the northern panhandle that he declined to name.

DeMarco said although he would love to see the Mountain State get the cracker, the potential for economic development across state lines would allow Ohio, Pennsylvania, and West Virginia to gain from the building of such a plant, regardless of where it is actually located.

“You are developing the cornerstone for manufacturing to come back to this part of the country,” he said. “If a cracker is built in any one of those states, all three are going to see economic development from it.”

Reasons a Cracker is Viable

With pipeline infrastructure to pump ethane from the Marcellus and Utica shale regions to the Gulf Coast or Canada for cracking there, some have questioned why Shell would want to spend a considerable amount of money to build a cracker in West Virginia, Ohio, or Pennsylvania.

The ATEX Express-a 1,230-mile pipeline set to be operational by 2014-will send about 190,000 barrels of ethane daily from the local natural gas producing region to Texas. The pipeline’s owner is Enterprise Products Partners. Chesapeake Energy has agreed to supply at least 75,000 barrels daily of ethane for the ATEX Express.

Caiman Energy and Range Resources also are planning to send ethane out of the Ohio Valley to Canada for use by the Nova Chemicals company at a cracker located there. Both companies will transport the ethane to Sarnia, Ontario, via the Mariner West Project pipeline developed by Sunoco.

Whether these plans will impact Shell’s cracker plant-or other potential cracker plants in the three states-is unclear. Dan Carlson, general manager of new business development for Shell, said the facility the company plans to announce soon would consume 60,000-80,000 barrels of ethane daily.

Shell spokeswoman Kelly op de Weegh said the company firmly believes building a cracker in the region is a good move, noting, “It makes good economic sense for gas producers and customers in the Marcellus to have a cracker in the region.”

DeMarco said peak production levels for ethane from the Utica and Marcellus formations is estimated to be about 400,000 barrels per day, an amount large enough to feed a cracker-even with the amounts set to be piped to other areas.

“The biggest reason to crack it here is transportation costs,” DeMarco said, noting it would probably cost 15-25 cents per gallon to ship the ethane to the Gulf Coast. “Then, once you pay to ship it down there, you have to pay to bring it back up here because the major markets are in the Northeast.”

Shell’s Project

Though op de Weegh said Shell believes in the cracker, published reports from late last week show that company Chief Executive Officer Peter Voser said Shell is still “quite a few years away from. . . a final investment decision” on the cracker. Voser made the comments while speaking during an energy conference in Houston, Texas.

When asked about Voser’s statements, op de Weegh said Voser was “referring to a final investment decision, which will occur after we’ve made a site selection.”

“We will first select a site and then begin the work necessary to progress the development of this project. Then, Shell will make a final investment decision to take the project further,” she said, noting the company still planned to announce a site “in the weeks to come.”

In addition to Shell, West Virginia-based Aither Chemicals also has announced intentions to build a cracker in the Marcellus and Utica region, though this project would likely be of a smaller scale.

Reasons Cracker is Needed

If a cracker is built, Shell expects 10,000 construction jobs will result, while several hundred chemical employees would work at the plant.

Officials in Ohio and West Virginia are eager to land the ethane cracker, as both states are offering Shell substantial tax incentives to attract the plant. West Virginia Commerce Secretary Keith Burdette has said the project could lead to as much as a “$5 billion” investment for the state, with the project supporting seven indirect jobs for every one of the direct chemical jobs.

West Virginia Gov. Earl Ray Tomblin traveled to Texas recently to encourage a company to build a cracker in his state, though he would not confirm the company was Shell.

Ohio State Sen. Lou Gentile, D-Steubenville, also recognizes the value of a cracker plant as he recently sent a letter to Shell encouraging the company to invest in the Buckeye State. Gov. John Kasich also flew to Houston last year to make a “personal pitch” to Shell officials in trying to gain the cracker.

In addition to the hundreds of direct jobs at the cracker, an American Chemistry Council study shows that a cracker would help West Virginia create about 12,000 new permanent jobs in related businesses. The chemistry council estimates the plant would help Ohio generate 17,000 jobs in chemistry and supplier industries, as well as $1 billion in wages and $169 million in state tax revenue.

“A cracker would truly be an anchor for the chemical industry and more downstream development,” DeMarco added. “All we can do now is wait to see what Shell and these other companies are going to do.”