A new company has leased about 1,500 acres in the Kanawha Valley of West Virginia and hopes to find investors to raise $2 billion to develop an ethane cracker and other downstream facilities.
Meanwhile, more than 600 people have signed an online petition stating their support for construction of a cracker in the Kanawha Valley, while an industry report estimates that ethane production in the United States will increase 50% by 2016.
Invictus LLC, a company incorporated last fall, has a five-year option on 1,456 acres in the Upper Kanawha Valley near Coalburg. Richard Neely -- a Charleston attorney and former West Virginia Supreme Court Justice who is a principal partner at Invictus -- told NGI's Shale Daily the company has bold plans for the property, a former mountaintop removal strip mine.
"It may end up being a refinery in addition to being a cracker," Neely said Tuesday. "We're exploring the possibility of converting some of this Marcellus Shale gas into things like diesel fuel -- using some version of the Fischer-Tropsch [FT] process -- and into naphtha and some other useful products. We're not limiting ourselves to simply separating out the ethylene and converting it to ethylene oxide."
According to Neely, Invictus' other investors are former Department of Environmental Protection (DEP) Secretary Michael Callaghan, Cunningham Energy President Ryan Cunningham and the Charleston-based firm Gaddy Engineering.
Neely said the company was looking to raise $3 million in equity funds to create a plant design model that would satisfy DEP requirements for an air permit, conduct further research into FT technology and take bids from contractors for the construction of the plant, which is estimated to cost $2 billion.
"This plant could help revitalize the chemical industry in Charleston," Neely said. "We have plenty of room for other plants on our 1,456 acres. If somebody wanted to build a chemical plant there and pipe directly into the ethylene oxide, they could do it. Or they could use the existing pipelines in the valley or ship it by rail car."
Neely said his partners were confident that the $2 billion for the plant could be raised on the private capital market, but the company was open to discussing a joint venture with a major.
"There are a lot of issues we have yet to sort out," Neely said. "But if West Virginia wants to develop and profit from the Marcellus and Utica [shales], then there is nothing for it but to start putting one foot in front of the other and marching on, solving problems as they arise."
The type of facility envisioned by Neely and his partners would thrill the Charleston Area Alliance (CAA), which has created an online petition seeking support for an ethane cracker in the Kanawha Valley.
"We still have a fairly sizable chemical industry here, with companies like Bayer, Dow, DuPont and others," Matthew Ballard, CEO of the CAA, told NGI's Shale Daily on Tuesday. "This would help recharge the industry and really help us achieve some downstream successes from the ethane cracker as well."
Ballard estimated that an ethane cracker would require at least a $1.5 billion investment, but would create thousands of construction jobs over a couple of years, followed by several hundred permanent jobs. He added that several downstream jobs would also be created at existing businesses because they would no longer have to import feedstock from elsewhere to create polyethylene, ethylene oxide and other products.
"We know how to do this," Ballard said, adding that the world's first ethane cracker was built in Clendenin, a town about 15 miles from the state capital, Charleston. "There are a lot of chemical engineers and chemical operators here in the valley that would be anxious to jump on board with a project like this."
According to a report by Bentek Energy LLC and Turner, Mason & Co., American ethane production is expected to rise 50% -- or by 475 million b/d -- by 2016. The report said Texas would account for most (280 million b/d) of an increase in American ethane supplies, while the demand for ethane will increase to 352 million b/d over the next five years.
Several companies are eyeing the states of the Marcellus Shale region as the location for an ethane cracker.
Royal Dutch Shell plc is reportedly considering sites in West Virginia, Ohio and Pennsylvania for a world-class cracker that could consume 60,000-80,000 b/d of ethane (see Shale Daily, Dec. 5; Sept. 7). And West Virginia officials have made the argument on several occasions that the Mountain State is the best option for an ethane cracker (see Shale Daily, Aug. 26; July 18; May 6; Dec. 23, 2010).
Elsewhere, a unit of Range Resources Corp. has agreed to supply Marcellus Shale ethane to Dow Chemical Co.'s existing operations in Louisiana, Westlake Chemical Corp. plans to expand its ethylene capacity, Chevron Phillips Chemical Co. LP may build a world-class cracker in the Gulf Coast region and Sasol Ltd. is considering a cracker in Louisiana (see Shale Daily, April 25; April 7; March 29).