Shell Plans to Build Ethylene Cracker in Marcellus Region

Company looks to increase investments in natural gas in North America.

UPDATE: 06/06/11, 3:27 p.m.

Shell Oil Co. plans to build an ethylene plant, known as a "cracker," in the Appalachian region of the United States as part of its long-term plan to monetize natural gas, the company said June 6.

The cracker would process ethane from natural gas in the Marcellus field, which spans the Appalachian Basin, to produce ethylene, a primary petrochemicals feedstock.

The ethylene produced will likely be used in the production of polyethylene, a raw material used in various manufactured goods including packaging and adhesives.

Most of the polyethylene produced would be sold to manufacturers in the Northeast United States. Polyethylene demand in North America is expected to grow, the company said.

Shell said it plans to take advantage of abundant and affordable natural gas resources in the United States by extracting ethane and other natural gas liquids for petrochemicals production.

The company's plans also include developing shipping solutions for liquefied natural gas; utilizing gas-to-liquids technology to produce fuels, lubricants and chemicals; and gas-for-transport in markets focusing on heavy-duty vehicles, marine and rail transportation.

This fits well with our strategy to strengthen our chemicals feedstock advantage and would be another step in growing our chemicals business to meet the increasing demand for petrochemicals, said Ben van Beurden, Shell executive vice president for chemicals.

Shell is among a growing number of petrochemical producers tapping into increasing shale gas resources in North America.

Dow Chemical Co. announced a plan on April 21 to build a new ethylene production plant in the Gulf Coast to take advantage of shale gas supplies in the Eagle Ford and Marcellus shale regions.

In addition, Bayer Corp. has said it's in discussions with chemicals companies that may be interested in building an ethane cracker at its industrial park in the Marcellus gas field.

Petrochemical expansion plans in the Marcellus region indicate the area contains a sufficient amount of ethane for more significant investments, says Kathryn Klaber, president and executive director of the Marcellus Shale Coalition, which represents gas-drilling companies in the region.

Shell and other petrochemical producers are tapping into the "wet gas" regions of the Marcellus field located in southwestern Pennsylvania, northern West Virginia and eastern Ohio.

About half of the liquids in the wet-gas region is ethane, which companies can convert into ethylene in a cracking facility, Klaber says.

Any petrochemical company looking to expand its market in the Northeastern United States is probably evaluating opportunities in the Marcellus region, Klaber says. Other chemicals producers are taking ethane from the Marcellus field to their existing operations in other areas, including the Gulf Coast to minimize their capital investments, Klaber says.

The developments point toward long-term availability of natural gas in the Marcellus field and other shale plays throughout the country, Klaber says.

But additional large-scale investments in the Marcellus field could be a challenge, says says Ron Gist, managing consultant at Purvin & Gertz, an energy consultancy based in Houston.

The facility Shell is pursuing would be a world-scale about one-million metric tons per year -- cracker with integrated derivative units. It's unlikely that there's room for more than one world-scale ethylene plant on the East Coast, Gist says.

"One more local cracker will pretty well absorb expected production in that region," he says. "I'll be surprised if there is another cracker."

The rugged geography of the area and a lack of derivatives plants nearby that consume ethylene present other issues, Gist says.

See also:

The New Black Gold

Marcellus and Shale Gas Energy Supply Chain

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