Pipelines May Dampen Ethane Cracker Prospects in PA

  • New natural gas pipelines under construction may make building an ethane cracker in the state a less attractive option. Photo: J.B.Pribanic/Public Herald

October 25, 2013

Royal Dutch Shell has been inching forward with plans for an ethane cracker in Beaver County, fueled by the region's plentiful natural gas, since early last year.  The Pittsburgh Business Times reports that five major gas pipelines under construction may make those plans obsolete.

The first sign that Shell may be waivering on the proposed plant came earlier this month, when outgoing CEO Peter Voser said the company's investment in natural gas exploration had been disappointing so far, according to StateImpact Pennsylvania

From StateImpact Pennsylvania:

This may not be good news for Pennsylvania where Shell has been actively drilling in Tioga County and has proposed building a gas processing plant called an ethane cracker in Beaver County. In August, the company announced it was going out to bid for suppliers as part of an ongoing site evaluation process. But in an e-mail to StateImpact Pennsylvania, a Shell spokeswoman downplayed the news as merely a project update. The deadline for bids was on Friday, October 4 and the company is not expected to make a final decision until next year.

Governor Tom Corbett has high hopes for the project and is doing what he can to convince Shell to seal the deal by pushing for large tax breaks and touting the thousands of jobs it could bring to western Pennsylvania.

Now there may be another obstacle to building of an ethane cracker in Pennsylvania: new natural gas pipelines which would divert the region's shale gas to the Gulf, where better infrastructure already exists.

From the Pittsburgh Business Times:

The five pipelines together are anticipated to take an estimated 710,000 barrels per day of natural gas and liquids to Canada, the East Coast and the Gulf Coast. Each pipeline will also have the capability of expanding capacity in the future.

In particular, the Gulf, where the petrochemical industry is well-established and chemical companies are expanding facilities to accept more of the feedstock originating from the Marcellus and Utica shales, has two huge advantages over western Pennsylvania: experience and pre-built infrastructure.

The Pittsburgh Business Times reports that while it may take five years for a new ethane cracker to become productive, the natural gas will keep flowing, and it has to go somewhere.  The question is, are companies willing to take the time to invest in a new market? 

A spokesperson for Range Resources was still supportive of the idea of a cracker in the region.

From The Pittsburgh Business Times:

The pipelines are coming online because the ethane and the liquids have to go somewhere, said Matt Curry, director of business development for Range Resources. He wouldn’t comment on whether Range has any commitments with Shell for the proposed cracker, but said the company would love to see the project built.

“There are no ethane users in the area,” he said, adding the region is constrained with limited options. Producers need to remove ethane from the gas stream or else the gas can exceed distribution pipeline specifications, and as more ethane-rich gas is produced, the liquid needs a home.

“What do we do?” he asked.

Range is sending some of its ethane on the Mariner West line up to Nova Chemical’s Canadian cracker, and the company has capacity on ATEX as well, he said.

Whether the liquids are used here or elsewhere doesn’t matter to producers as long as it goes somewhere. However, Curry said, if local facilities are built, Range would favor them because of the economic development that would occur, plus it would save money on transit costs.

The Pittsburgh Business times reports that there is speculation among industry and economic groups that another company may step in if Shell decides not to build in Beaver County.