Just curious if anybody has seen continued work by Shell at the old Horsehead plant.  By the same token, has anybody heard any rumblings as to how things are coming along? 

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EIA: Ethane Production to Keep Growing

April 3, 2016
By CASEY JUNKINS Staff Writer , The Intelligencer / Wheeling News-Register

WHEELING - There may just be plenty of ethane for pipeline projects to keep pumping it out of the Marcellus and Utica shale regions, yet still supply the planned $5.7 billion PTT Global Chemical cracker complex in Belmont County, according to data from the U.S. Energy Information Administration.

On Friday, the administration announced U.S. ethane production should grow from 1.1 million barrels per day in 2015 to 1.4 million barrels daily in 2017, an increase of 300,000 barrels daily.

For the last five years, the amount of ethane produced has exceeded the capacity to consume or export it, according to the administration. This has left many producers to employ "ethane rejection," which is an industry term for mixing the liquid with the the dry methane for marketing as natural gas.

Along with propane, butane, isobutane and pentanes, ethane is one of the liquid forms of natural gas prevalent in the Marcellus and Utica formations. Presently, companies operating in the region have three options for their ethane: Reject it for blending with methane, flare it off to eliminate it or place it in a pipeline for transportation for use elsewhere.

The administration projects U.S. ethane consumption will jump by 50,000 barrels per day this year - and then by another 80,000 barrels per day in 2017. There are six ethane crackers under construction in the U.S. that could process some of this once they are operational: the Sasol ethane cracker complex at Westlake, La.; the Occidental Chemical/Mexichem ethane cracker at Ingleside, Texas; the Formosa Plastics ethane cracker at Point Comfort, Texas; the Dow Chemical ethane cracker at Freeport, Texas; the Exxon Mobil Chemical ethane cracker at Baytown, Texas; and the Chevron Phillips Chemical ethane cracker at Baytown, Texas.

The competition for ethane derived in Ohio, West Virginia and Pennsylvania remains fierce. Officials with Thailand-based PTT are scheduled to make a final decision on whether to build their massive Belmont County plant by the end of the year, but a projected four-year construction period likely means the facility would not actually crack ethane until at least 2020.

Officials believe such a facility could spur the development of additional plants that would use the material from the cracker. Moreover, officials with Royal Dutch Shell continue working on a potential ethane cracker near Monaca, Pa., while some West Virginia officials still hope for the Odebrecht project in Wood County.

However, some producers are signing deals to send ethane out of the region for cracking aboard pipelines such as the Mariner East and Mariner West operations, the ATEX Express and the Utopia Pipeline. In fact, Sunoco Logistics and Kinder Morgan collectively plan to spend about $3.5 billion to move ethane elsewhere for processing.

Last month, the first ethane tanker departed Sunoco's Marcus Hook Industrial Complex for its trans-Atlantic journey to deliver the product to an Ineos cracker in Norway. Up to 70,000 barrels of ethane per day now cross Pennsylvania via Sunoco's Mariner East 1 pipeline on the journey to Marcus Hook. Sunoco is now working on the Mariner East 2 pipeline, which the company plans to have carry additional ethane, propane, butane and other natural gas liquids through Pennsylvania by next year. The company estimates the total cost of its Mariner East project at $3 billion.

Simultaneously, Kinder Morgan is working on the $500 million Utopia Pipeline, which would send the ethane from MarkWest's Harrison County fractionator across Ohio to a connection with existing company infrastructure in Michigan.

Still another outlet for Marcellus and Utica ethane could be for electricity generation, as developers of the planned $615 million Moundsville Power facility have said they would burn ethane at their plant.

Shell has Spent “Half a Billion Dollars” on PA Cracker Already!

money-bag.jpgThe Pittsburgh Business Times hosted an event yesterday in Beaver County, PA–the place where Shell is spending money to explore whether or not to build an ethane cracker plant. Seems like we’ve been writing about Shell’s potential ethane cracker forever. We’ve chronicled just about every up and down. We’ve also highlighted various initiatives they’ve undertaken since announcing Monaca, PA as their chosen site–something they did back in March 2012, now four years ago (see Shell Announces Location of Ethane Cracker Plant). Since that time Shell has purchased the property where they want to build the plant; they’re building a bridge and roads to the plant site; they’ve leased office space near the plant site. They’ve done a whole lot more. What we didn’t realize is that when you add it all together, according to Pat Nardelli, a partner at Castlebrook Development and speaker at the PBT event, Shell has spent “half billion to date if not more, and it’s going up every day.” Yikes! In this economy nobody blows a half bil on something they just decide to walk away from…

Beaver County’s actively getting ready for Royal Dutch Shell’s arrival, whether or not the energy giant ultimately decides to build an ethane cracker plant in Beaver County.

That’s the word from a panel who spoke at the Pittsburgh Business Times Corridors of Opportunity: Beaver event, held Thursday at The Fez. Panelists included Chris Reber, president of the Community College of Beaver County; Pat Nardelli, a partner at Castlebrook Development; and Sandie Egley, Beaver County commissioner and chairman of the board of the Beaver County Planning Commission.

“The one thing about Shell is whether they make the decision or not, they’ve spent a half billion to date if not more, and it’s going up every day,” Nardelli said. “The most important residual factor is we are going to have one heck of a building pad sitting down there totally prepared for whomever. … They are making this committment, they’ve built the bridge, are going ahead with the parking garage, so something is going to be done. We are training people now, and we are going to be ready for Shell when they make that announcement.”

Nardelli noted that the infrastructure is starting to be put into place for the plant, including work being done on Route 18, sewer water being taken care of, and Shell seeking land to develop parking for the thousands of anticipated jobs that will be created during the construction process.

“When Shell needs this stuff, it will be there,” he said.*

Aside from parking and other infrastructure needs, Shell will need a skilled workforce. Click the link below to read more about what was said at the PBT event about Shell’s forthcoming ethane cracker and how the county is getting ready for it.

*Pittsburgh (PA) Business Times (Apr 7, 2016) – Beaver County prepares for Shell cracker

This may mean very little, but I thought it was interesting:

Recently, a few customers (working at the cracker site) have come into our store that now sport work jackets that have Shell embroidered on them as well as their first name. First time I've seen this.

Craig,

Perhaps we the neighbors of the cracker plant can all negotiate those cool orange Shell jackets with our name embroidery as a prerequisite of their joining our community!

Good information.

Thanks, Todd 

I could not resist asking who gave them the coat or Oh do you work for the Shell company? And pick the conversation from there. But that's just me..LOL..maybe you could scarf one..You would look good in a SHELL jacket with Craig on it ..Oh I'll take one maybe the negotiations for the ethane pipeline would go a lot easier..LOL

These folks come in more or less regularly. Oh, I ask... They basically aren't allowed to talk about anything specific anymore. Of course they don't really know much of the overall picture either. With all the cement being poured, etc, it is getting down to brass tacks and public decision time one would think.

Thanks Craig.
Funny how "rumors" usually contain a grain or two of truth! ;-)
...

Ain’t Wastin’ Time No More--Shell Chemicals Ready to Act on Ohio River Cracker?


Shell Chemicals is taking steps that suggest it finally may be ready to pull the trigger on a long-debated petrochemical complex which would include an ethylene plant (steam cracker) and three polyethylene units in the heart of the “wet” Marcellus/Utica natural gas liquids production region. If the $3+ billion project advances to construction soon, it would significantly impact ethane market dynamics, not just in Ohio/Pennsylvania/West Virginia but along the Gulf Coast too. And if it turns out we’re in for extended stagnation in drilling and production, the Shell cracker also may undermine plans to build additional NGL pipeline capacity out of the Marcellus/Utica—or any other cracker there.  Today we discuss the likelihood of Shell proceeding with its Beaver County, PA cracker and the effects the project’s development might have.


The production of NGLs in the Utica/Marcellus really started taking off in 2011-12, when shale drillers, responding to declining prices for natural gas, began to focus on “wet” gas liquids plays to take advantage of higher prices – thus higher returns. That required the build-out of gas processing and fractionation capacity, which we documented initially in Whoville, the Big New NGL Hub in Marcellus/Utica, and more recently in our Join Together With Demand series and Drill Down Report. As we noted in that report, in 2009, there was only 600 MMcf/d of gas processing capacity in the entire Northeast region, most of it legacy infrastructure dating back decades, and now there is some 7,600 MMcf/d of gas processing capacity—more than 40 new plants built in the past six years, most of them built by MPLX (MarkWest) at eight major processing centers across the region.  There are still more gas processing plants on the drawing boards. Similarly, there’s now some 500 Mb/d of fractionation (C3+ or full range) and another 240 Mb/d of de-ethanization capacity. All that production—natural gas, mixed NGLs and “purity” products like ethane, propane, butanes and natural gasoline—has also resulted in the build-out of extensive take-away capacity (pipelines for gas, NGLs and purity products; rail- and barge-loading terminals for NGLs and purity products) as well as the development of local gas-fired power plants to consume Marcellus/Utica gas and—the subject of our blog today—proposals to construct in-region steam crackers to consume locally sourced ethane.


We zeroed in on the NGL/purity products side of things (takeaway pipelines and local cracker projects in particular) in Episode 9 of the Join Together series. There, we discussed four possible crackers in the Marcellus/Utica: 1) a Shell Chemicals project in Potter and Center townships, Beaver County, PA; 2) a Braskem North America/Odebrecht project in Parkersburg, WV; 3) an Appalachian Resins project in Salem Township, Monroe County, OH; and 4) a PTT Global Chemical/Marubeni Corp. project in Allenport, Washington County, PA. Since then, no Final Investment Decision (FID) has been made for any of the four, but in recent months Shell has made moves that strongly suggest it’s close to committing to its project, including the signing of a long-term contract for 76,000 square feet of office space near the project site and the negotiation of right-of-way agreements with nearby landowners for two pipelines that would deliver ethane to the planned cracker.


Let’s look at what’s Shell’s been considering: a petrochemical complex (see rendering below) with a cracker that would convert about 90 Mb/d of ethane into ethylene, as well as three polyethylene units that would convert ethylene into about 1.6 million tons of polyethylene a year. The facility would be built at a 780-acre site on the Ohio River (formerly the site of the Horsehead Zinc smelter); its ethane would be supplied by nearby fractionation units and/or de-ethanization units (more on this in a moment).

Figure 1; Source: Shell Chemicals

The polyethylene units (see project-site rendering in Figure 1 above) would produce low-density and linear low-density polyethylene (LDPE and LLDPE) that is used to make a wide variety of every-day products (things like food packaging, film, trash bags, toys and diapers), as well as high-density polyethylene (HDPE) that is used to make crates, drums, bottles, food containers and other types of housewares. In addition to making ethylene, the cracker would generate various byproducts used to make fuels and other chemicals.

Regional Ethane Infrastructure

Now let’s consider the Marcellus/Utica ethane infrastructure situation that Shell--and the others considering Marcellus/Utica crackers must integrate into their operations. As we said, midstream developers over the past four years have built an impressive array of fractionators and de-ethanizers, as well as pipelines to keep the production and takeaway of ethane (and other NGLs) in balance.  By far the most extensive system in the region is that developed by MPLX (formerly MarkWest) shown in Figure 2.  The system includes gas processing plants, fractionators and de-ethanizers linked together by parallel liquids pipelines with gas plant connections into all the regional natural gas pipes.   As we described in Join Together With Demand/Ethylene Crackers the MPLX system includes a distributed de-ethanization network (each processing plant complex gets its very own de-ethanizer) and separate “Ethane Loop” Distribution (the green pipelines in Figure 2) that can transport all extracted ethane to the ETP/Sunoco Mariner pipelines, the Enterprise AETX pipeline and to the Shell plant site – orange triangle).  The system works as an extended supply/distribution header designed such that a downstream ethane take-away problem can be “distributed away”.  If a downstream outage cuts ethane demand, each processing plant can reject a portion of the ethane necessary to balance the system.  Each processing plant can reject just enough ethane to handle the problem without causing an issue with gas take-away pipeline BTU content.  (See Back to the Ethane Asylum for more about ethane rejection.)  In effect, this system acts similar to storage for handling ethane demand disruptions, which is quite important since there is no ethane storage in the region.

Figure 2; MPLX Ethane System That Would Feed Shell Plant; Source: RBN Energy

Regional Market Conditions

As noted above, production of ethane and other NGLs has been rising at a rapid clip in the Marcellus/Utica for a few years now. (Ethane accounts for about 60% of the typical NGL “barrel” from the region; the ethane percent varies considerably from well to well, and can be as high as 70% and sometimes below 50%.) Future NGL production levels (including production of ethane, the purity-product focus of our attention today) will depend in large part on future hydrocarbon prices.  If crude oil prices are high, that will tend to boost NGL prices, encouraging producers to drill for more “wet” gas containing higher quantities of NGLs.  If crude prices are low, the converse will be true.  Producers will tend to drill for more dry gas, particularly for some of the very large dry gas wells that are being developed in the Marcellus and Utica (see Dry County? Utica Dry Gas Wells Headline).  Thus, under RBN’s Growth Scenario (which has crude prices rising to $60/Bbl by 2021), potential ethane supply (both extracted and rejected) in the Northeast would continue climbing, to more than 700 Mb/d five years from now (green-plus-blue shaded areas in Figure 3). However, under RBN’s Contraction Scenario (in which crude oil drops back from current levels and holds at no more than $40/Bbl by 2021), potential ethane supply in the region would stay flat (green shaded area).  See Spinning Wheel for more about RBN price scenarios. The take-away here is that there is a wide range of how much ethane that will be available for extraction in the region, depending mainly on the level of crude prices.

There are only three things you can do with the ethane produced in the Marcellus/Utica: 1) move it away by pipeline, 2) “reject” it into locally produced natural gas, thereby increasing the Btu value of the gas, and 3) - if a local cracker gets built- consume it in that local cracker. Option 2 has been the “go-to” choice for most of the region’s ethane the past few years due to poor economics for extracting ethane (worth more selling as gas than transporting and selling as liquid ethane), constrained ethane take-away capacity, and the fact that no local cracker has been constructed. The mostly horizontal lines in Figure 3 (within the green and blue shaded areas) show the cumulative takeaway capacity that’s been built or planned, beginning (at the bottom) with Sunoco Logistics’ 50 Mb/d Mariner West pipeline (purple line), which moves ethane from Houston, PA to Marysville, MI and the Canadian border for supply to Sarnia, ON crackers. Then there’s the 125 Mb/d first phase of Enterprise Products Partners’ Appalachian-to-Texas (ATEX) ethane pipeline to Mont Belvieu, TX (blue line), and Sunoco’s Mariner East pipeline from Houston (PA) to the company’s export terminal at Marcus Hook, PA (orange line; first ethane cargo exported 3/9/16; see Ethane: Boat on the Water!!). These pipelines can move the ethane volume shaded in green below the orange line.  In total there is about 225 Mb/d of pipeline takeaway capacity today, although this capacity is not currently running full.  In 2016, just over 200 Mb/d will be rejected and sold as natural gas (area over the orange line plus capacity not utilized in existing take-away pipelines due to rejection economics). 

Figure 3 Ethane Balance; Source: RBN Energy

With that much rejection in the region, clearly there is enough ethane for Shell’s 90 Mb/d cracker.  But Shell is not the only company with designs on that ethane supply.  There are several pipeline expansions in the works that could theoretically move all Contraction Scenario ethane out of the region by 2018.  The planned projects, are the lines stacking up in Figure 3 in 2017 and beyond:

  1. Expansion of Mariner East to move more ethane out of Marcus Hook (2016-17 bump-up in orange line)
  2. The proposed Kinder Morgan Utopia East pipeline from Harrison County (in eastern Ohio) to Fulton County, OH at the Ohio-Michigan border (red line, 50 Mb/d, expandable to 75 Mb/d)
  3. Expansion of Enterprise’s ATEX pipeline to 265 Mb/d (yellow dashed line)
  4. Other raw mix pipeline which could be Kinder Morgan’s Utica Marcellus Texas Pipeline (UMTP) project discussed below (green dashed line)

Kinder Morgan’s Utica Marcellus Texas Pipeline (UMTP) project would batch mixed NGLs and ethane and other purity products along a converted—and flow-reversed—Tennessee Gas Pipeline that for years moved natural gas north from the Gulf Coast to Ohio. 

Both the ATEX pipeline expansion and the Kinder Morgan UMTP projects haven’t made much progress getting shipper commitments and are a pretty hard sell today.  The price of ethane is only 19 cents/gal in Mont Belvieu, and it costs 14.5 cents/gal to transport Marcellus/Utica ethane to Mont Belvieu via the existing ATEX pipeline—and we understand it would cost closer to 18 cents/gal to move it on an ATEX expansion—and there is an additional 5 to 7 c/gal fractionation fee at one end of the pipe or the other.  Those economics are about a nickel under water, making it a tough proposition when today’s low ethane prices leave shippers with a negative netback.

But as we said in Spinning Wheel – Prices for Natural Gas Liquids (NGLs) Headed Back Up, the price for ethane on the Gulf Coast is expected to increase significantly when all the new ethane-only crackers and the Enterprise Morgan’s Point ethane export facility are fully on-line.

So here’s the bottom line.  If crude prices are high, it is likely that there will be more than enough Marcellus/Utica ethane for Shell’s cracker, a second cracker, and the pipeline projects discussed above.  Ethane prices will be higher, not such a good thing for Shell.  But the plant is being developed very close to ethane supplies, which will provide a significant feedstock transport cost advantage versus Gulf Coast crackers.  On the other hand, if crude oil prices are low it is likely that there will not be enough ethane to go around for Shell, another cracker and all those pipeline projects.  Most likely Shell would be able to secure long-term contract supplies for their facility, leaving most of the pipeline projects high and dry.  

The impact extends far beyond the Marcellus/Utica region.  Those ethane barrels used by the Shell cracker will not be moving by pipeline to the Gulf Coast, which will further tighten that market as new ethane-only crackers and the Enterprise ethane export dock come on line. 

It will be some time before we know how all this shakes out.  But for beleaguered producers suffering with low NGL prices and big-time ethane rejection, the possibility of tight markets, buyers fighting over their barrels and higher ethane prices sounds pretty good.

Excellent analysis and info today from RBN except for the map!

Still good news I believe.

Chief Financial Officer for Shell: 

http://www.timesonline.com/news/energy/shell-cfo-local-cracker-plan...

Route 18 relocation soon starting...which Shell said it wouldn't do unless they are committed to building the cracker plant.

http://www.timesonline.com/news/shellcracker/shell-chemicals-to-mov...

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