Shell Chemicals is taking steps that suggest it finally may be ready to pull the trigger on a long-debated petrochemical complex which would include an ethylene plant (steam cracker) and three polyethylene units in the heart of the “wet” Marcellus/Utica natural gas liquids production region. If the $3+ billion project advances to construction soon, it would significantly impact ethane market dynamics, not just in Ohio/Pennsylvania/West Virginia but along the Gulf Coast too. And if it turns out we’re in for extended stagnation in drilling and production, the Shell cracker also may undermine plans to build additional NGL pipeline capacity out of the Marcellus/Utica—or any other cracker there. Today we discuss the likelihood of Shell proceeding with its Beaver County, PA cracker and the effects the project’s development might have.
The production of NGLs in the Utica/Marcellus really started taking off in 2011-12, when shale drillers, responding to declining prices for natural gas, began to focus on “wet” gas liquids plays to take advantage of higher prices – thus higher returns. That required the build-out of gas processing and fractionation capacity, which we documented initially in Whoville, the Big New NGL Hub in Marcellus/Utica, and more recently in our Join Together With Demand series and Drill Down Report. As we noted in that report, in 2009, there was only 600 MMcf/d of gas processing capacity in the entire Northeast region, most of it legacy infrastructure dating back decades, and now there is some 7,600 MMcf/d of gas processing capacity—more than 40 new plants built in the past six years, most of them built by MPLX (MarkWest) at eight major processing centers across the region. There are still more gas processing plants on the drawing boards. Similarly, there’s now some 500 Mb/d of fractionation (C3+ or full range) and another 240 Mb/d of de-ethanization capacity. All that production—natural gas, mixed NGLs and “purity” products like ethane, propane, butanes and natural gasoline—has also resulted in the build-out of extensive take-away capacity (pipelines for gas, NGLs and purity products; rail- and barge-loading terminals for NGLs and purity products) as well as the development of local gas-fired power plants to consume Marcellus/Utica gas and—the subject of our blog today—proposals to construct in-region steam crackers to consume locally sourced ethane.