Beaver County upbeat as Shell ponders new plant
Officials in Beaver County are staying optimistic about oil giant Shell's plans to build big along the Ohio River, even as the multibillion-dollar proposal faces new competition.
“We have not seen anything halting or holding back the project,” County Commissioner Joe Spanik said, referring to the ethane processing plant known as a cracker. “The one thing that we have that nobody else has is (gas) in the ground right here. “
What they don't have is a decision from Royal Dutch Shell, which “isn't anywhere close” to making one after two years of research, Chief Financial Officer Simon P. Henry told analysts on Oct. 31.
The company will have to drop one of its big-ticket projects in North America, and that could be in Beaver County, Henry said — the worst in a steady stream of dour news for the project over the past month.
On Thursday, Brazilian company Odebrecht announced it would explore whether to build a competing cracker in Parkersburg, W.Va. Henry made his comments in between, explaining what the company would do after another drop in profits.
The project is competing internally against a Louisiana plant that would turn natural gas into motor fuels and a Canadian project to export liquefied natural gas, Henry said. They're all approaching critical milestones for the company to move them into the design phase, he added, calling them “an embarrassment of riches of high-quality opportunities.”
“We can't do all of these,” he said. “We cannot afford to take all three together at once. And even if we could, I'm not sure we have the engineers and the project managers to do so. So we will need to make choices which go forward.”
The way the news has snowballed has been difficult to take, said R.T. Walker, a vice president and oil and gas specialist at real estate company CBRE Inc. He said he's trying to stay optimistic.
“I'm concerned for the region,” he said. “Time kills deals.”
While Shell has studied its property in Center and Potter, about a dozen other North American projects have moved along to potentially compete with Shell. The most recent, Odebrecht and its subsidiary Braskem S.A., has staked out a spot just about 130 miles down the Ohio River.
The draw for Shell is to have a cheap supply of gas from the surrounding Marcellus and Utica shales, and turn it into plastics it can sell nearby in the densely populated Northeast.
That should give it an advantage over competitors on the Gulf Coast which have to pay to transport their materials and products back and forth. Another plant in the area would make it more difficult to acquire customers, several industry analysts said.
“They would have to fight for market share,” said Stephen Zinger, head chemicals analyst at Wood Mackenzie Limited in Houston.
“It's going to be all dependent on (if) they (can) get the right feedstock prices for their investment and the right volumes to support it. If they can't, they're not going to get the return on investment.”
Shell's expertise is in oil and gas production, while Braskem's is in making and selling chemicals, so they'll be battling from opposite sides of the petrochemicals industry, experts said.
They may even want to consider joining forces on just one joint project, Zinger said.
A Shell spokeswoman declined to comment.
Braskem's spokesman at its regional headquarters in Philadelphia said the project is only in a “really, really early” stage, too early to answer more questions about the company's plans.
Braskem's look at West Virginia isn't all bad news for Shell, Zinger said. Although it would be difficult for both to build, interest from a second, globally respected company in and of itself gives more credence to the idea of a cracker in the area, he said.
There are many doubters, but the decision isn't certain either way, several experts said.
Kristen Holmquist, a natural gas analyst in Denver, has grown less pessimistic on Shell's project during the past year.
The growing supply of gas can feed these projects without question, and Shell's slow progress isn't out of line with other similar projects that often take five years to develop, she said.
There are obstacles to overcome — supply storage and finding customers — but the other Shell projects have equal or bigger problems, she said.
The Louisiana plant has to compete against a growing supply of domestic oil that can more easily be used to make the same thing, motor fuels, she said.
The Canadian export terminal has daunting political challenges in getting a pipeline to the Pacific Coast, she added.
The next big milestone will be in December. Owners of two pipeline projects to ship Appalachian gas to the Gulf will announce their first round of contracts, Zinger said.
The size of the deals for those lines should be good barometers on how much interest there is for drillers to sign deals with Shell or Braskem, he said.
Shell has an early January deadline to buy land on which it has an option in Beaver County, said Ali Alavi, spokesman for Horsehead Holding Corp., which owns a soon-closing zinc smelter there.
It has delayed that option twice already. Shell has 70 workers there continuing to do environmental assessments, Spanik said.
“I'm a guy who always believes it's half full,” said Richard N. George, supervisor in Center.
“Everybody says they're right on schedule with what they're going to do.
“Then that means there's no reason to think they're not coming, or we're not still in the game.”
Timothy Puko is a staff writer for Trib Total Media. He can be reached at 412-320-7991 or firstname.lastname@example.org.
Show commenting policy
TribLive commenting policy
You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.
We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.
While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.
We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers.
We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.
We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.
We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.
We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.
- Customers anxious for details about Highmark transition plan for W. Pa.
- Highmark denies premiums in federal insurance marketplaces affected by level of competition
- EDMC reaches debt-restructuring deal with creditors
- Court clears FedEx Ground drivers to pursue wage, benefit claims
- Spiders force Suzuki to recall midsize cars
- Hotel extras? Oh, yes, there’s a fee
- Cadillac SRX to be assembled in Tennessee
- MF Global’s $1B suit against PricewaterhouseCoopers to go before jury
- 2 top technology officers leave UPMC
- Feds tighten loan-backed securities
- Disney files patent for drone-controlled puppets