The State of Ohio Offers Incentives for an Ethane ‘Cracker’ Plant

by Duane Nichols on December 23, 2011

Recent news is that Ohio is competing with Pennsylvania and West Virginia for a multibillion-dollar ‘cracker’ chemical plant that would process ethane from the Utica and Marcellus shales. Shell Chemical is expected to decide in early 2012 where the ethane cracker plant will be built. It is reported that the company has looked at more than 40 sites in the three states.

Ohio has offered state incentives of $1.4 billion to Shell Chemicals, according to Greenwire, a national energy and environmental news service. The project would require a few hundred acres near a river and railroad facilities, and as many as 10,000 construction workers according to Shell spokesman Dan Carlson.

Shell has four such plants in the United States and has Marcellus holdings in Pennsylvania. In mid-2010, the company purchased the Marcellus holdings of East Resources for $4.7 billion. Shell could add an adjoining complex to process polyethylene and mono-ethylene glycol (anti-freeze).

According to the Wall Street Journal, as reprinted elsewhere, the processing of ethane into chemicals is 50% cheaper than using crude oil-derived naphtha. Ethane availability has made U.S. petrochemical companies the envy of overseas competitors. It also brings the prospect of lower prices for auto parts, Styrofoam and other products. “Now there’s tremendous growth in natural-gas liquids, with more growth seen on the horizon,” said Adam Bedard, senior director at analysis firm Bentek Energy.

The boom has turned into a potential profit center for oil-and-gas producers, as well as for the pipeline companies that transport ethane, the demand for which grew to about 933,000 barrels a day during the first half of 2011, up from 812,000 barrels a day in 2009, according to Bentek Energy. But like the other fuels extracted from remote shale deposits, the biggest problem is how to get it to facilities that can process it.

A dearth of pipelines created a bottleneck that drove the price that petrochemical companies pay for ethane to 95 cents per gallon in the third quarter of 2011, from 60 cents at the start of the year, said Dow Chemical Co. Chief Executive Andrew Liveris. But even with that price spike, chemical companies prefer ethane over other chemicals, he said. 

According to the WV Secretary of Commerce, there is continuing activity in State government to attract an ethane ‘cracker’ chemical plant to the Kanawha or Ohio valley. Sites at Natrium in Marshall county and near Montgomery in Kanawha county are under consideration, among others.

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