Ethane Cracker Plant Developers are Moving Cautiously in Appalachia

by Duane Nichols on December 6, 2016

Dilles Bottom in Ohio River Valley

Dilles Bottom Site in Ohio River Valley Cleared for Cracker

Decision on R.E. Burger Property Expected by March

From an Article by Casey Junkins, Wheeling Intelligencer, December 4, 2016

PHOTO: Approximately eight months ago, FirstEnergy’s R.E. Burger Plant stood prominently along the Ohio River. Today, the site has been cleared for development of the PTT Global Chemical America ethane cracker.

Dilles Bottom, OH – Site preparation for PTT Global Chemical’s planned multi-billion-dollar ethane cracker project in Belmont County is nearly complete, as all signs of the former R.E. Burger power plant along the Ohio River are now nothing more than a memory.

After more than a year of evaluating the viability of the project — which would create thousands of construction jobs in the construction phase and hundreds of permanent jobs once it’s up and running — officials expect the Thailand-based chemical giant to make a final investment decision by the end of March.

“So far, all the signs we see are positive,” Belmont County Commissioner Mark Thomas said. “We anticipate them making their final decision by the end of March.”

In September 2015, Ohio Gov. John Kasich joined PTT President and CEO Supattanapong Punmeechaow at the Statehouse in Columbus to confirm plans to spend at least $100 million for engineering and design plans for the plant, which some estimate would cost about $5.7 billion to complete. In July, FirstEnergy Corp. officials blew up the 854-foot-tall smoke stack at the former Burger plant to make room for the giant ethane cracker, which will also include a significant number of acres to the south and west.

“It’s a very good sign that FirstEnergy worked so quickly to remediate the site,” Belmont County Commissioner Ginny Favede said. “They have worked with Jobs Ohio on this.”

Jobs Ohio is the private economic development corporation Kasich and Republican legislators created in 2011. Matt Englehart, spokesman for Jobs Ohio, said Friday that officials are close to being able to make some announcements, but couldn’t provide more details. PTT spokesman Dan Williamson also said he had no new information.

“Things are moving very smoothly. The company’s due diligence continues,” Thomas said. “The remediation of the FirstEnergy site is, in effect, complete.”

Thomas said the company continues working its way through the Ohio Environmental Protection Agency permitting process for both water discharge and air emission certificates.

If PTT makes an affirmative final investment decision, the construction project will require thousands of construction workers.

“The majority of the contracting work will be done by those from the local area,” Favede said.

“All the local labor that can be provided will be working,” Thomas added. “The project is so big that, at times, there will not be sufficient labor here.”

Although several new hotels and apartment complexes have opened across the Upper Ohio Valley during the last few years, Thomas and Favede said most of these will fill up rather quickly.

“You are going to have a lot of out of town people here. Those who have private apartments and hotels, they are going to be full for four years,” Thomas said.

Royal Dutch Shell is already building its giant ethane cracker north of Pittsburgh, but the majority of industry leaders believe there is so much ethane in the Marcellus and Utica shale region that it can both support multiple new cracker plants and provide feedstock to other established plants around the globe. Ethane now flows across Pennsylvania to the Marcus Hook refinery via the Sunoco Logistics Mariner East 1 project. The material then goes to Europe for processing in trans-Atlantic sea vessels.

Sunoco is now working on the Mariner East 2 pipeline, which the company plans to have carry additional ethane, propane, butane and other natural gas liquids through Pennsylvania by next year. The company estimates the total cost of its Mariner East project at $3 billion. Pipeline giant Kinder Morgan is also working on the $500 million Utopia Pipeline, which would send the ethane from MarkWest’s Cadiz plant to a connection with existing infrastructure in Michigan. The ethane would then go onward to Corunna, Ontario, Canada for processing by Nova Chemicals Corp.

These pipeline projects are in addition to the active ATEX Express pipeline that sends Marcellus and Utica ethane to the Gulf Coast, as well as Sunoco’s Mariner West project that already ships the material to the Nova Chemicals facility in Canada.

“This entire region is going to be a major player in the energy sector for a long time to come,” Thomas added.“And Belmont County is right in the heart of it all.”

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US ethane cracker updates in petrochemical Q3 earnings calls

From an Article by Kristen Hays, Platts News, November 3, 2016

The first in a wave of US Gulf Coast ethane cracker projects is slated to start up in the first quarter of 2017 when Occidental Petroleum Corp. and MexiChem’s new joint-venture 550,000 mt/year project near Corpus Christi, Texas, wraps up commissioning by mid-January. Mexichem Chief Executive Antonio Carrillo said the plant will ramp up throughout 2017, reaching 100% capacity in late 2017.

Here is a roundup of other major cracker project updates provided during third-quarter earnings calls:

Chevron Phillips Chemical’s ethane cracker, a 50/50 JV of Phillips 66 and Chevron Corp., likely will cost another $250 million to $500 million because a months-long delay has pushed its target startup to the second half of 2017. Phillips 66 Chief Executive Greg Garland told analysts last week that the delay will probably raise the cost of the project in Baytown, Texas, by 5%-10% “just due to delays we are seeing in construction,” though two associated polyethylene plants 86 miles away in Sweeny, Texas, are expected to be mechanically complete in the second quarter and start up by mid-2017 as planned. About $5 billion of the combined $6 billion project is related to the cracker. Phillips 66 President Tim Taylor said the main push behind the delay is construction amid a tight craft labor squeeze.

ExxonMobil Corp and Saudi Basic Industries Corp (SABIC) are continuing their evaluation of Texas and Louisiana coastal sites for a new 1.8 million mt/year ethylene plant, in addition to a new 1.5 million mt/year cracker at ExxonMobil’s Baytown, Texas, refining and chemical complex slated to start up 2017. ExxonMobil expects global chemical demand to grow 1% above gross domestic product through 2040, which will need about 5 million tons per year of new capacity. “To put that into hardware, that would be three to four world-scale crackers per year,” said Jeff Woodbury, vice president of investor relations and secretary. “That sets up the value proposition.”

Enterprise Products Partners has “gained some traction” on adding ethylene export capability with potential customers seeking access to more markets, namely Asia, Chief Executive Jim Teague told analysts last week. He also hinted that Enterprise is likely to build adjacent to the company’s new ethane terminal on the Houston Ship Channel that started up in September. “You can imagine, if we do it at Morgan’s Point, we are sticking it right next to our ethane export” facility, he said. “So it kind of ties together.”

Teague also said the wave of new US ethane crackers slated to begin starting up along next year will need supply from the Rocky Mountain and Northeast regions as well as the Gulf Coast, and those volumes will be competitive despite added transportation costs. “It’s still about the gas-to-crude spread. You can have ethane prices go up so that it supports transport out of the Northeast or the Rockies, and then ethylene plants can still be advantaged here relative to the rest of the world.”

Dow Chemical’s new 1.5 million mt/year cracker in Freeport, Texas, is 85% mechanically complete and remains on track to begin start up in mid-2017, Chief Operating Officer Jim Fitterling told analysts last week. A cracker and three polyethylene units have started up at the company’s joint-venture Sadara project in Jubail, Saudi Arabia, with 2017 being the “big start-up year” for another 22 units and reliability tests in 2018, Chief Executive Andrew Liveris said.

He also said the company sees weakness in the global industrial economy, but strength in consumer, safety, hygiene and environmental products. Fitterling said the recent minor energy sector rebound with oil prices surpassing $50/b only to fall back to the high $40s/b range has been too small to make a significant impact on industrial chemicals.

Williams Companies expects to decide by the end of the first quarter 2017 whether to sell its 88.5% share of its 1.95 billion pounds per year olefins complex in Geismar, Louisiana, or forge a long-term, fee-based deal to operate it while a partner buys all the output and assumes all the commodity risk. In September Williams announced plans to exit the merchant petrochemical business with a sale or tolling agreement, though Chief Executive Alan Armstrong said that month a sale was likely most favorable. During a quarterly earnings call this week, he said Williams is open to either option as long as a sale is swift or a tolling deal is struck with a reliable partner with strong credit.

Lyondell Basell Industries’ Corpus Christi, Texas ethylene complex is being commissioned after a turnaround and a 363,000 mt/year ethylene expansion that will boost capacity to 1.15 mt/year. Chief Executive Bob Patel told analysts this week he expects the plant to operate at its expanded capacity during November.

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