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Ohio Ethane Cracker Site Being Cleared; Investment Decision Still to Come

Work to clear part of a site in Belmont County, OH, for PTT Global Chemical pcl's (PTTGC) proposed ethane cracker has already started and is expected to be complete by the fall.

FirstEnergy Corp.'s former coal-fired Burger Power Plant is being demolished to potentially make way for the nearly $6 billion ethane cracker that was announced in September by PTTGC, the petrochemical and refining subsidiary of Thailand's state-owned oil and gas company, PTT pcl (see Shale DailySept. 3, 2015). FirstEnergy's 150-acre site is being considered for the future site of the cracker along with a nearby 350-acre plot.

FirstEnergy spokeswoman Jennifer Young, however, said the company had already planned to demolish the site for conversion into an industrial greenspace prior to PTTGC's announcement.

"We had planned to demolish buildings and cleanup the site to make way for some future project," Young said. "Certainly, this project is a great possibility for the area and we support it and would like to be a part of something that would be good for the local economy."

FirstEnergy retired the coal-fired plant in 2011. After searching for almost two years to identify a site for its cracker, PTTGC said in September that it would invest $100 million for the facility's preliminary design work. It said at the time that it had signed a purchase option agreement for some of the properties in Mead Township along the Ohio River. If constructed, the facility would be at the epicenter of Ohio's Utica Shale development. The facility would source Marcellus and Utica shale ethane for conversion into ethylene and polyethylene, which are key building blocks for plastics.

But Young said FirstEnergy does not have a purchase option agreement with PTTGC for the site it's clearing. While the company is in negotiations to "transfer the property" to PTTGC, nothing has been finalized, she said. JobsOhio, the state's private economic development organization that has worked closely with PTTGC, said the company has an option for one of the properties. When asked to identify the property, the organization did not provide any details

"This project is still in the early months of front-end engineering design assessment," said JobsOhio spokesman Matt Englehart. "During this process, JobsOhio will work cooperatively with PTTGC regarding possible site development requirements for the petrochemical complex."

PTTGC's cracker proposal is one of five for the region (see Shale Daily, May 21, 2014; Nov. 14, 2017; Jan. 19, 2012, June 7, 2011). In November 2014, Odebrecht SA, through its petrochemical affiliate Braskem SA, announced that it would construct a multi-billion dollar facility in Wood County, WV. Aither Chemicals LLC in 2012 said it would construct a $750 million cracker that would utilize Marcellus ethane, but never identified a site and has mentioned little about the proposal since. Appalachian Resins Inc. in 2013 said it would construct a small-scale 15,000 b/d facility in Monroe County, OH, but later said it would put those plans on hold after PTTGC made its announcement.

Royal Dutch Shell plc said in 2011 that it would construct a multi-billion dollar facility in Western Pennsylvania. To date, that facility is the farthest along. The company has purchased a 400-acre site near the Ohio River in Potter and Center townships in Beaver County, PA (see Shale DailyNov. 7, 2014). While it has delayed a final investment decision, Shell has continued to make site preparations.

Odebrecht said last year that it would postpone its plans for the West Virginia facility pending further project analysis amid the commodities downturn (see Shale DailyApril 23, 2015). Shell noted in its air quality permit application, filed with Pennsylvania in 2014, that if its facility were to be constructed, it would be the first project of its kind built outside the Gulf Coast in 20 years (see Shale DailyAug. 5, 2014). It remains unclear if any of the facilities will get built.

Edward Hill, a professor of public affairs at Ohio State University who tracks development in the state's oil and gas industry and its effect on the regional economy, said PTTGC's $100 million investment announcement bodes well for Ohio. He added that other than the work Shell has done at its site, PTTGC's investment is a strong signal for the region that a cracker could eventually be constructed.

"Shell is giving every sign of large investments around the Pennsylvania plant; they're doing site preparation, building bridges and roads, so there's clearly some substantial money involved," he said. "How much money Odebrecht has spent is unclear. It's my understanding that they've just completed a state-of-the-art cracker in Monterrey, Mexico, and some of the engineering for that plant could have transferred to West Virginia.

"I would guess that Shell is at the top of the heap in terms of spending," Hill added. "In this market, though, that [investment] announcement from PTTGC gives them another year to try to see where the oil and gas markets are heading. It has to be a good time to do pre-engineering and certainly it's hard -- even in the oil and gas world -- to walk away from $100 million."

Indeed, PTTGC has signed contracts with a consortium of engineering firms to do preliminary design work. Asian and European plastics producers also typically use an oil-based feedstock rather than natural-gas based feedstocks. The company has said the Ohio cracker could have significant cost advantages, especially in a region where demand is high for petrochemical products.

"It's an announcement we should remain optimistic about," said Hill, who also serves as a faculty affiliate at the Ohio Manufacturing Institute. "...Now, if China goes into an industrial recession; international politics allow Iran and Iraq to put more oil out on the market and [Saudi Arabia] does too, then it's likely some of these players are going to head for the hills, or the sidelines for a while."

Young said all structures at the Burger property are being removed to two feet below grade. She said much of the asbestos abatement has been completed, while larger demolitions, such as removal of the power plants on site, won't begin until the Spring. After the site is cleared, it would be reseeded and converted into an industrial green space.

PTTGC said it expects to make a final investment decision on the cracker either this year or next. It has partnered with Japanese global services company Marubeni Corp. to develop the facility and has said it is searching for a third partner to help finance the project. If it advances, the cracker would take more than three years to construct. It has a tentative in-service date of 2020.

"If we get PTT Global and Shell to enter the market here, we've won in the near-term," Hill said. "It's hard to say how one goes in on its own. I've always contended...that this is a long-term, 40 year [shale] play, and one-, two-, three-year price swings are politically driven. It won't affect long-term development."

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