West Virginia Gov. Earl Ray Tomblin announced Thursday that a Brazilian company, Odebrecht Organization, will explore the possibility of building a multibillion-dollar ethane cracker and three polyethylene plants in Wood County.
Meanwhile, in neighboring Pennsylvania, conflicting reports have emerged over the status of a cracker proposed by a unit of Royal Dutch Shell plc.
Tomblin and Odebrecht officials said the Ascent (Appalachian Shale Cracker Enterprise) complex would include water treatment and energy co-generation infrastructure. They said the proposed facility's proximity to the Marcellus and Utica shales and existing infrastructure made the site near Washington, WV, an attractive one.
"Although we realize much work remains to be done, this announcement of a potential project is tremendous news for our state and our region," Tomblin said at West Virginia University-Parkersburg's Caperton Center for Applied Technology. "I appreciate the hard work of my team from the Development Office and the Ascent team members who have come together to explore this investment. I look forward to working closely with them to help bring the project to fruition."
David Peebles, Odebrecht's vice president for business development, said the company had completed the first phase, FEL 1, of its research into the viability of the project, and would immediately begin the next phases. He said that after two years of discussing the project with state officials, the time had come to make an announcement.
"Bear with us. The time frame for us is as soon as possible, but we aren't going to jump into a pool without knowing how deep the water is," Peebles said. He declined to go into specifics about the project's size or cost, but did say "we will be spending a large amount of money."
According to reports, Odebrecht has been acquiring several hundred acres of land in the Washington area.
"We do have an option to acquire the land, which we will probably exercise in the next phase," said Fernando Reis, CEO of Odebrecht Environmental. "This is one of our first commitments. We are negotiating the feedstock also, it's not committed yet. We have to acquire the land, go further into engineering, and enter into some local agreements to probably discuss into further details many things."
Reis added that Odebrecht will lead Ascent's investment and financing, as well as the operation of water and electric utilities.
Matt Warnock, an attorney with Columbus, OH-based Bricker & Eckler LLP and co-chairman of the firm's Shale Task Force, said a cracker in West Virginia was critical to the development of the Marcellus and Utica shales.
"Obviously, the shale play has generated tremendous optimism, and recent production reports from horizontal shale wells are proving the potential of the resource beneath our feet," Warnock said. "Now that we have great wells, we need an outlet for all that production. The midstream and downstream phases of development, including the proposed cracker, are critical to the long-term development and viability of the shale play."
Less than 200 miles away, Shell Chemical LP has proposed a "world scale" ethane cracker on a 300-acre site near Monaca, PA, in Beaver County (see Shale Daily, March 16, 2012).
Speculation has run rampant recently over the status of the project. Last month, Rusty Braziel, an analyst with RBN Energy Inc., told the Wall Street Journal that he doubted the project would move forward, while outgoing Shell CEO Peter Voser indicated that plans for the cracker could be scrapped in an interview with the Financial Times.
But in a separate interview last month, Graham van't Hoff, executive vice president for Shell Chemicals, told IHS Chemical Week that the company had hired The Linde Group and Bechtel Corp. to perform front end engineering design (FEED) work for the facility.
Shell spokeswoman Kimberly Windon told NGI's Shale Daily that the company was continuing to evaluate the Monaca site.
"The site evaluation process for a proposed project of this scale typically takes several years to complete, and we expect similar timing in this case," Windon said Thursday. "Much more work needs to be done before a decision to build the proposed project could be made.
"As we've said in the past, the site evaluation involves several components including confirming the suitability of the site, securing ethane feedstock supply, completing the engineering and design work, confirming the support of customers for our products, receiving all the necessary permits and confirming that the project is economically robust and competitive. As part of this process we evaluate potential transportation routes, work with the regulatory agencies to secure the appropriate permits, and meet with the community and other interested parties to listen to their input and answer their questions."
Windon said Shell had not made a decision to advance to the FEED stage on the cracker.
"If the complex is built, Shell Chemical expects that its upstream affiliate, Shell Western Exploration and Production Inc., would provide a portion of the ethane supply for the proposed petrochemical complex," Windon said.
Last June, Shell asked for and received a six-month extension to decide whether to purchase the former zinc smelter site from Horsehead Holding Corp. It was the second time the deadline had been extended (see Shale Daily, July 2; Dec. 28, 2012).