Updated Oct. 21, 2013 12:07 a.m. ET

When Royal Dutch Shell RDSB.LN +0.65% PLC unveiled plans early last year to build a multi-billion-dollar petrochemical plant in Pennsylvania, the company saw it as a smart way to exploit the boom in natural gas coming from the region's Marcellus Shale formation.

The plant would turn ethane, which is a liquid produced alongside natural gas and oil, into ethylene, a chemical used to make plastics. Annual global demand for plastics is expected to rise by half by 2020 to about 225 million tons, according to estimates from Exxon MobilCorp. XOM -0.37% , which operates petrochemical plants.

Ethane costs have fallen by 20% from last year to a recent 25 cents per gallon, making it the feedstock of choice for plastic makers.

Yet Shell's proposed plant location in Northwest Pennsylvania sits vacant, despite almost $2 billion in state tax incentives. Meanwhile, analysts wonder whether new pipelines envisioned to move Pennsylvania ethane to Texas and Louisiana could erase Shell's advantage and torpedo its plans entirely.

State and local officials referred all questions about the plant to Shell, which still hasn't purchased the land for the project. The company now says it might take several more years to evaluate the 360-acre site, according to spokeswoman Kim Windon. Earlier this month the company ended an official search for oil and gas producers to supply ethane to the plant, but hasn't disclosed the outcome.

"They've taken 18 months to think about it, and then they say they're still thinking about it," said Rusty Braziel, an analyst with consulting firm RBN Energy Inc. The plant "fundamentally doesn't make sense to me," he added.

Since Shell proposed its plant, three pipeline projects that would channel Marcellus Shale ethane southward have been announced. Kinder Morgan Energy Partners KMP +1.89%LP, Enterprise Products Partners LP and Williams Companies Inc. have said they will build lines carrying 600,000 barrels per day of ethane and other liquids from the Marcellus down to the Gulf Coast.

With the added capacity coming on line, it may make more sense to pay to move ethane across the country via pipeline than build an entirely new plant with entirely new, expensive infrastructure in Pennsylvania, said Raymond James analyst Darren Horowitz.

At first blush, Pennsylvania would seem to offer a lot of advantages for ethylene production. In the next three years, the state's ethane output could increase eightfold, reaching 650,000 barrels a day, according to RBN Energy projections.

But even though Pennsylvania would seem to have a home-field advantage, sitting atop so much ethane, the state can't compete currently with the Gulf Coast's massive infrastructure, home to millions of barrels of ethane storage and pipelines feeding nearly a dozen petrochemical complexes and plastics plants, according to RBN.

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