Consol Energy CEO predicts 2 ethane cracker plants for region
The global crash in oil prices and resulting squeeze in financing available to energy companies have raised questions about whether two companies will build ethane cracker plants in the Marcellus and Utica shale regions.
The head of one of the top shale gas producers in the area, however, predicts both petrochemical facilities will be built in the next decade.
“We will see one to two ... I believe two cracker plants built in this region,” Consol Energy Inc. CEO Nick DeIuliis said Friday during the University of Pittsburgh's Energy Law and Policy Institute gathering Downtown.
Such facilities would take ethane — a liquid that comes up with natural gas from many shale wells in Western Pennsylvania, Northern West Virginia and Eastern Ohio — and convert it to ethylene and polyethylene, the building blocks of many common plastic products.
“If you look at the demand for ethylene and plastics within 500 miles of this region, 50 percent of the demand exists” within that radius, said DeIuliis, who noted he had no inside knowledge of building plans.
Advocates for building here, where ethane is plentiful and cheap since the shale boom began 10 years ago, say their construction would spur more manufacturing in the area as the makers of those plastic products seek to locate close to the feedstock.
Despite hundreds of millions of dollars spent on two potential sites in the region, though, their construction is not certain.
Royal Dutch Shell chose the site of the former Horsehead Holdings zinc smelter in Beaver County four years ago as a potential location, and has spent the past two years preparing it for construction.
The company has not made a final decision on making the multibillion-dollar investment needed to build, though, said company spokeswoman Kimberly Windon. The company has slashed capital spending over the past two years as it deals with less revenue from oil and gas.
Farther down the Ohio River in Belmont County, Ohio, PTT Global Chemical commissioned $100 million in studies to examine the feasibility of building at a shuttered power plant across the river from Moundsville, W.Va.
DeIuliis said the biggest concern people initially had about whether to build here — such plants have traditionally operated on the Gulf Coast — has been answered.
“I think we've put to bed the question of whether we'll get the amount of ethane produced here that will be needed,” he said.
Ethane production soared with the shale boom, so much so that prices for ethane have spent the past few years depressed because of oversupply. The Energy Information Administration this month predicted domestic ethane production would grow another 27 percent through 2017 and investment in pipelines and petrochemical plants to use the liquid would increase.
“These projects increase take-away capacity for ethane, especially in the Marcellus and Utica shale regions, mainly in Pennsylvania, Ohio, and West Virginia, where market outlets for rapidly growing natural gas supply were previously limited,” the agency said.
Consol and other producers stand to gain from a cracker or two in this area.
The Cecil-based company has a deal to supply Shell with ethane if it builds.
In the meantime, Shell, Range Resources and Rex Energy are putting ethane on pipelines such as Sunoco Logistics' Mariner East line to the Philadelphia area, where it's being exported to Europe for cracking.
David Conti is the assistant business editor at the Tribune-Review. Reach him at 412-388-5802 or email@example.com.