Shell seeks suppliers for Pa. ethane cracker - Beckley, Bluefield & Lewisburg News, Weather, Sports

Shell seeks suppliers for Pa. ethane cracker

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As Shell Chemical Co. moves closer to a decision on whether it will build a multi-billion-dollar ethane cracker plant in Pennsylvania, it is seeking more suppliers of raw materials from the Marcellus and Utica shale regions.

In an announcement issued Aug. 27, Shell said it is accepting bids from ethane suppliers through Oct. 4.

The site of the plant is near the town of Monaca in Beaver County, Pa., near West Virginia's Northern Panhandle.

 "Securing additional ethane supply is one of the key components in determining next steps as part of the ongoing site evaluation process," the company said in the statement issued this week.

If the complex is built, Shell Chemical expects that its upstream affiliate, Shell Western Exploration and Production Inc., would provide a portion of the ethane supply for the proposed petrochemical complex, the statement said. Shell said it has secured commitments from four companies already: CNX Gas Co. LLC, a subsidiary of Consol Energy; Hilcorp Energy Co.; Noble Energy; and ∫

"Shell Chemical still has several critical milestones to achieve before making a final investment decision on whether to proceed with construction of this proposed complex," the statement said.

The site Shell is considering is a zinc smelter owned by Horsehead Corp. On June 28, Horsehead said it had signed an agreement with Shell to extend Shell's option on the property until the end of this year.

"The option that was in place expired at the end of June, but we've negotiated another six-month option through the end of the year. So we think that's a very likely outcome, that they will exercise that option," Horsehead Holding Corp. CEO James M. Hensler said in a conference call with investors several weeks ago, according to a transcript of the call by the website seekingalpha.com.

Ethane is a liquid that is a byproduct of drilling for natural gas in the shale gas region that includes northern West Virginia. The ethane molecule can be broken apart, or "cracked," and put back together to form chemicals that are useful in various manufacturing processes and products.

Not all Marcellus shale regions produce liquids along with gas. Those that do are known as "wet gas" areas, and companies that produce gas are concentrating their efforts in those areas instead of "dray gas" areas, which produce less or no liquids.

In June 2011, Shell announced plans to assess the building of a world-scale petrochemical complex in the US Appalachian region that would upgrade locally produced ethane from shale gas production.

West Virginia, Pennsylvania and Ohio competed to be designated as the preferred site for the plant.

On March 15, 2012, Shell signed a land option agreement to evaluate the Monaca site.

Shell said it looked at various factors to select the preferred site. Among them:

  •     Good access to liquids-rich natural gas resources and water;
  •     Road and rail transportation infrastructure;
  •     Power grids;
  •     Economics;
  •     Sufficient land to accommodate facilities for a world-scale petrochemical complex and potential future expansions.

In addition to an ethane cracker, Shell is also considering polyethylene (PE) and mono-ethylene glycol (MEG) units to help meet increasing demands in the North American market. The company anticipates that much of the PE and MEG production would be used by industries in the northeastern US.

The Shell plant would be the first by a major corporation in Appalachia, although other companies have announced plans to build smaller cracker plants. Some gas liquids are being taken from the shale regions by pipelines to crackers in other areas, such as along the Gulf Coast.