Marcellus Shale reserves may spark life into a shuttered, 110-year-old oil refinery complex south of Philadelphia that once supported nearly 500 jobs, according to IHS Inc. researchers.

The Sunoco Marcus Hook Industrial Complex, which closed its doors in December, is spread along 780 acres of the banks of the Delaware River. The refinery began service in 1902, and before it ceased operations it was processing up to 175,000 b/d of crude oil into petroleum and petrochemical products in Delaware County, PA. IHS staff thinks the complex still has a lot of potential, especially with the unconventional natural gas and liquids from the Marcellus Shale that surround it.

“We identified several possible reuse options for the Marcus Hook facility and what is interesting is that most of these opportunities are possible only as a result of the recent, phenomenal growth of the U.S. shale oil and gas plays,” said IHS Consulting Managing Director Brendan O’Neil. “Without these plays, the options available to Marcus Hook would be more limited, and if pursued, could potentially provide an economic ‘second life’ to the complex…”

Marcellus Shale Coalition (MSC) President Kathryn Klaber said the study “underscores the positive potential economic impact associated with safe, responsible natural gas development. Delaware County has the infrastructure and talented workforce to keep the Marcus Hook facility operational, which is critical to the region’s economy and to the Commonwealth.”

IHS was commissioned to conduct the independent study by the Delaware County Council, which appropriated funds and directed the county’s Industrial Development Authority to undertake the research to identify “potential future redevelopment concepts” that would best utilize the site’s assets to maintain employment levels and to perpetuate a sustainable economy in the county, as well as the East Coast region.

“Despite the fact that they don’t own the site, the Delaware Council was very proactive in seeking an independent assessment for reuse of this facility, which may serve as a model for other communities [that] are likely to face similar industrial shutdowns in the future. It shows a willingness to bring industry and community together to solve problems and to create economically sustainable development,” said O’Neil.

IHS combined analyses for the study from across its organization, with an economic review by IHS Global Insight, an energy perspective from IHS CERA and chemical insight by IHS Chemical and Purvin & Gertz.

An economic profile was completed for the region, followed by a supply/demand analysis of the markets for potential alternative uses based on two broad categories: energy products storage and Marcellus Shale-based downstream chemical production.

Seven potential reuse options for the Marcus Hook facility were examined, with five energy-based options and two Marcellus chemical-based options. The five energy-based options are:

The chemical-based options are to use the facility for ethane cracking and derivatives, or for propane dehydrogenation.

The reuse options “all showed promise,” but “some options had greater viability than others,” the IHS study said. “The East Coast is advantaged…in that it lays adjacent to the Marcellus Shale development, a large geologic formation, despite the fact that production from this region contains only minor crude oil and condensate production.”

A “deeper analysis is needed to fully discern the potential rate of return on capital of repurposing options,” but “the reuse of Marcus Hook for shale-based chemical processing, natural gas liquids processing and refined petroleum storage suggest the greatest market potential.” However, “job creation related to any of the reuses will not fully offset the jobs lost to refinery closure.”

The United States “now has a feedstock cost advantage over most other regions of the world for producing certain petrochemical products, such as ethylene or propylene,” said IHS Chemical Managing Director Anthony Palmer. “Both of these are possible products that the Marcus Hook complex could deliver with modifications. Another reuse option for Marcus Hook is for storage of refined petroleum products, which could leverage the site’s five underground granite caverns for liquids. There are some infrastructure issues that would need to be addressed for each of the proposed uses studied, and a more in-depth assessment would certainly need to follow, but these options are viable.”

According to Palmer, the study may offer hope to other communities where aging refineries face closure because of factors that have impacted demand and profitability for refined petroleum products. “Unfortunately, many East Coast refineries are located too far from key sources of feedstock production to be cost competitive.”