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Shell Granted Another Extension on Proposed Cracker Site

A subsidiary of Royal Dutch Shell plc has signed a second, six-month extension that gives it more time to decide whether to purchase property in western Pennsylvania that could ultimately be used for a "world scale" ethane cracker in the heart of the Marcellus Shale region.

Horsehead Holding Corp., a zinc producer, said Friday that Shell Chemical LP had signed an amendment to the original option and purchase agreement from March 2012 for a 300-acre site in Beaver County, PA (see Shale Daily, March 16, 2012). Horsehead said Shell would be using the additional time to "perform its evaluation" of the site, which is near Monaca.

"There is nothing really new [to report] beyond the additional six month extension the parties agreed to last week," Horsehead spokesman Ali Alavi told NGI's Shale Daily on Monday. "Shell activity relating to the site continues."

Shell was granted a previous six-month extension last December (see Shale Daily, Dec. 28, 2012). The original terms of the deal -- presumably for a major petrochemical complex that would include a cracker -- called for its conclusion at the end of 2012.

"Quite frankly, in our conversations with Shell we knew that this was going to happen," Steve Kratz, spokesman for the state Department of Community and Economic Development (DCED), told NGI's Shale Daily on Monday. "This is just another step in the process."

Pennsylvania Gov. Tom Corbett said the extension was "good news" for the state. "This project would be the single-largest industrial investment in southwest Pennsylvania in a generation," Corbett said. "It will develop a market for the state's natural gas supply, helping to create new jobs and the prosperity that comes with them."

Catherine DeLoughry, spokeswoman for the Pittsburgh Regional Alliance, said the group remained optimistic that Shell would eventually build a cracker at the Monaca site. "Extending the term of a land option agreement is a routine aspect of this kind of ongoing evaluation," DeLoughry said Friday, adding that the extension "doesn't change anything about the continuing evaluation. It just reaffirms that both parties remain interested in a future transaction that would transfer ownership of the site to Shell."

DeLoughry cited a Pennsylvania Economy League of Greater Pittsburgh (PELGP) study that said 18,000 jobs, 10,000 of them directly, would be created during the peak construction phase of an ethane cracker. Once the facility is complete, the PELGP study predicted between 2,000 and 8,000 jobs (400 of them direct) would be created, with an annual economic output of $4.8 billion.

Two months ago, state and company officials had hinted that an extension was possible (see Shale Daily, April 30). At the time, Shell was observed conducting due diligence activities at the site.

Last week, analysts with Raymond James & Associates Inc. said it was unlikely that Shell would proceed with plans to build a cracker in the Marcellus region before 2015 (see Shale Daily, June 25).

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