USA: Megaplant Could Turn Shale Market Upside-Down Will They or Won’t They: Shell’s Plans for Its Six-Billion-Dollars Ethane Project

Editor: Dominik Stephan

Shell plans to build a 1.5 million tons per year ethylene plant alongside three polyethylene plant for a whopping US $ 6 billion has the potential to change the US shale and ethylene markets. The estimated 90-100 million barrels ethane per day that the plant would need alone could have significant impact on the US gas market…

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Shell intends to establish shorter supply chains between gas feedstock and its American customers.
Shell intends to establish shorter supply chains between gas feedstock and its American customers.
(Picture: Shell Global)

Pittsburgh, Pennsylvania/USA – Shell’s announcement of a Final Investment Decision (FID) to build a US $ 6 billion dollar ethylene mega-project in western Pennsylvania made quite in impact on America’s gas markets. This enormous cracker infrastructure would reduce the amount of ethane to be moved out of the shale gas rich Marcellus region to the US Gulf Coast or export gas terminals by an estimated 90-100 million barrels per day.

While the FID is by no means a guarantee that these plans will be carried out, it still represents a major commitment to a mega plant in an area where ethane is readily and cheap available in huge quantities. Although other cracker projects have been proposed in the area since, Shell could bring its assets on-stream as early as 2021 or 2022, given a construction begin in 2017 or 18.

The Biggest Ever in the Tristate Area

The cracker project is one of the biggest-ever in the area bordering Pennsylvania, Ohio, and West Virginia, a region struck by set backs and de-industrialisation in the late 20th century. Now, market experts fear that the enormous size of Shell’s plans could cause a shortage of workers and feedstock alike. Further, the Marcellus and Uttica basins are rich in shale gas but lack an appropriate gas storage infrastructure.

What has Happened so Far

In 2014, Shell purchased an 40-acre brownfield site on the banks of the Ohio River in Potter Township, Beaver County, Pennsylvania, about 30 miles off Pittsburgh. Since then, the oil company has begun huge preconstruction works and constructed railroads, bridges and highways as well as a new dock facility on the Ohio river to move quipment in and out of the construction zone.

Up to 20 % Percent in Tax Savings to Lure Oil Giant to Pennsylvania

Local administration has granted the oil multi strong support and financial incentives, including a massive tax credit of 5 cents/gallon (corresponding to $2.10/barrel) of ethane used to produce ethylene until 2042. Local experts estimate that Shell could save up to 20% in taxes in Pennsylvania through this credit.

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