The excitement over Shell Chemical Appalachia LLC's final investment decision (FID) to construct a multi-billion dollar ethane cracker in Western Pennsylvania was palpable at one of the region’s first shale-related petrochemical conferences in Pittsburgh on Monday.
The first Northeast U.S. & Canada Petrochemical Construction Conference & Exhibition was nearly sold out, with 250 in attendance, conference organizers said. State economic development officials from Ohio, West Virginia and Pennsylvania shared their economic outlook for the burgeoning Northeast petrochemical industry and said two other proposed ethane crackers that would be comparable in size to Shell's facility remain on track.
"I just want to say how excited we all are about the decision that Shell made. It was actually closer to five years from initial discussions," said Secretary of the Pennsylvania Department of Community and Economic Development Dennis Davin of the work that went into attracting Shell to the region. "So it's been a long time. It spanned two different administrations. The previous administration really went all out on this one and really did a great job," he added of former Republican Gov. Tom Corbett's administration.
Shell first expressed interest in building an ethane cracker in Western Pennsylvania in 2011. On June 7, the company said it would begin construction on the facility in about a year-and-a-half (see Shale Daily, June 7). It would be built on a 400-acre site adjacent to the Ohio River in Potter and Center townships in Beaver County, about 30 miles northwest of Pittsburgh.
With a capacity to produce 1.6 million metric tons/year (mmty) of polyethylene and 1.5 mmty of ethylene, which are key building blocks for plastics, the facility is expected to employ 6,000 during construction and another 600 permanent employees once it's operational in the early 2020s. It would also be the first time in more than 20 years that such a facility has been built in the United States outside of the Gulf Coast.
State officials speaking on a regional governance panel Monday morning expressed optimism that Shell's decision would help advance two other similar projects planned for the region.
Thailand's PTT Global Chemical pcl (PTTGC) said last year that it would spend $100 million on preliminary design work for a multi-billion dollar facility in Belmont County, OH (see Shale Daily, Sept. 3, 2015). Brazil-based Odebrecht SA announced plans in 2013 for a facility in Wood County, WV, that would also be comparable to Shell's cracker (see Shale Daily, Nov. 14, 2013). The company said last year, however, that it would postpone its plans for the West Virginia facility pending further project analysis amid the commodities downturn (see Shale Daily, April 23, 2015).
Odebrecht recently transferred control of that project to its petrochemical affiliate Braskem SA, which recently told NGI's Shale Daily that Shell's decision to move forward with its facility would not affect its plans. PTTGC said the same.
David Mustine, Senior Managing Director of Ohio's private economic development organization, JobsOhio, said PTTGC's project remains on track. Key air and water permits for the facility, he said, were filed in May and early June. The company, he said, is in the final stages of completing its design, engineering and cost analysis work. It hired two engineering consortiums to maximize competition and options, Mustine added.
"They have reiterated that their goal is to have a final investment decision in the first quarter of 2017," Mustine assured conference attendees. "So, it has pretty much been on target since we started working with them a couple years ago."
In an interview with NGI's Shale Daily, Secretary of the West Virginia Department of Commerce Keith Burdette said he remains optimistic about Braskem's facility, saying he expects the company to make a decision in 2017 or soon after.
"I can't tell you specifically what they're doing. But I can tell you their site is -- I'm guessing -- about 95% prepped," Burdette said. "All the demolition, almost all of it has been done. I think they're still looking at a couple things on the site, but they're probably further ahead [of the other facilities] as far as site preparation."
Burdette said Braskem's permitting process has been ongoing for two years. The company has only recently slowed permits down that must be active on a certain date.
"Braskem's parent has had a lot of challenges in Brazil," Burdette added. "To be honest, we are pleased that Odebrecht has kind of said 'this is now Braskem's project.' Odebrecht stepped away from it. We actually think that uncomplicates things a bit because we've been working with Braskem the longest." The company, Burdette said, has yet to set a date for an FID.
In October 2015, Ohio, Pennsylvania and West Virginia signed a three-year cooperative agreement aimed at creating policies that would promote the region's prolific shale plays to help generate more economic opportunities (see Shale Daily, Oct. 14, 2015). That effort, state officials said on Monday, is essential going forward in order to help the Appalachian Basin compete with the Gulf Coast.
Panelists noted that about 70% of the nation's polyethylene consumers are within 700 miles of the tri-state region. While they acknowledged that some of what is produced at Shell's facility will go to the Gulf or be exported overseas, they're still doing everything they can to get more money for workforce development and site preparation to be better prepared for the economic activity that Shell's facility and others are likely to create.
"The competition is pretty much over. It's over...We're not trying to build a facility anymore, we're trying to build an industry," Burdette said. "We make perfect sense, the opportunity to extract or process [natural gas], manufacture with it and sell it within the same basic area of the country is real and significant."