Shell Chemicals for nearly two years has said its final decision to construct a $4 billion ethane cracker near Pittsburgh wouldn’t come quickly. Too much due diligence to perform, too much feedstock ethane to lock up in contracts, too many customers to sign for the ethylene the cracker produced. And now, perhaps too much competition to make the region’s largest construction project in decades viable. All the ethane production from the Appalachian Basin could be swallowed easily by the seven pipelines either operating, soon-to-flow or in various development/construction phases, consultants and analysts have said. The total capacity of the seven proposed lines is 455,000 b/d, even before enhancements already announced. The Shell cracker is projected to consume 80,000-90,000 b/d of ethane. Bentek Energy, a division of Platts, estimates ethane production to grow just to 310,000 b/d by 2019. “Shell certainly faces competition from pipeline projects,” Bentek’s Marissa Anderson said. Competition, yes, but not annihilation, experts tell Platts.
Roughly 90,000 b/d of ethane currently is being rejected in PADD 1, according to Bentek. Ethane rejection is actually a form of inclusion, as the market for free-standing ethane becomes so weak that the economics actually favor using it for its BTU content by keeping it in the natural gas stream. So the idea is that with a lot of ethane is getting stuck in natural gas, the economics of using it in petrochemicals could be an incentive to pry it loose. “You can definitely do a cracker in Appalachia,” said Kelly Van Hull, an analyst with RBN Energy. “We’ll still be rejecting ethane even up to 2018, 2019.”
Taryn Slimm, lead analyst covering the US onshore for GlobalData, points out another positive piece in the Pennsylvania cracker puzzle. “As companies move toward liquids-rich production for optimum well economics, production from the wet gas windows is expected to continue to climb in the coming years,” she said. Shell Chemicals has maintained an option on the property, owned by zinc manufacturer Horsehead Corp, since March 2012. The latest option extension was announced last month but, unlike previous extensions, this one wasn’t for six months; its length wasn’t revealed. Also, in December, Horsehead announced, and Shell confirmed, that the two companies have agreed to raze some buildings on the site, with Shell paying the costs
Read more: http://blogs.platts.com/2014/01/14/pitt-ethane/