Pieces Falling Into Place for Green Light on Ohio Ethane Cracker

  • Apr 10, 2019
  • Natural Gas Intel

PTT Global Chemical pcl (PTTGC) and Daelim Industrial Co. continue to work toward sanctioning the multi-billion dollar ethane cracker proposed for southeast Ohio, a project spokesman said this week.

A final investment decision (FID) has been in the offing since 2015, when PTTGC committed $100 million for preliminary design work on the facility and initially expected to have a decision by 2017. The timeline was later pushed back to 2018 and passed. While no decision is imminent, pieces continue to fall into place that suggest the plant will ultimately get built, sources said.

Project spokesman Dan Williamson said PTTGC and Daelim are currently focused on selecting an engineering, procurement and construction (EPC) firm to build the massive facility. They recently contracted with a local business to remove trees from the proposed site. The project has also cleared all major regulatory approvals, having secured its air permit late last year from the Ohio Environmental Protection Agency.

PTTGC, Thailand’s state-owned petrochemical and refining company, partnered last year with Daelim to explore the plant’s feasibility and secure funding. South Korea-based Daelim Industrial is the parent of Daelim Group, a conglomerate that develops petrochemical facilities and power plants worldwide.

Shortly after the partnership was announced, PTTGC said it would nearly double the Ohio facility’s design capacity to 1.5 million metric tons/year of ethylene, or at least 500,000 metric tons/year more than it first announced. That announcement put the facility in line to produce the same amount of ethylene as Royal Dutch Shell plc’s ethane cracker, which is under construction in nearby Western Pennsylvania.

Shell’s facility is designed to consume about 100,000 b/d of ethane. Shell first floated the idea of building a cracker in Pennsylvania in 2011 and didn’t announce an FID until 2016. Both plants would convert ethane produced in the Marcellus and Utica shales to ethylene and polyethylene, both key building blocks for plastics.

PTTGC has purchased all of the nearly 500 acres it needs to build its plant at a site in Belmont County along the Ohio River. The company has secured commercial arrangements with producers for feedstock as well as those for utility supplies, product marketing and logistics.

NAI Spring’s Bryce Custer, a petrochemical and energy services real estate broker who works throughout the Ohio River corridor from Pennsylvania to West Virginia, said the consensus in the region is “yes” the plant will get built. Economist Ned Hill, who teaches at Ohio State University and has tracked the project, said people he has spoken with remain optimistic about a positive FID as well.

FULL SPEED AHEAD

“There’s a lot going on down there right now; nothing’s stopped,” Custer said of activity in the area near the proposed site. “If you would have asked me the same question three months ago, I probably would not have been quite as positive, but I’m positive again.”

Custer said NAI Spring is seeing more land activity in anticipation of PTTGC’s cracker being built. He said the firm is primarily working with international companies that don’t have a strong presence on the Gulf Coast, including plastics manufacturers and those interested in using other gases, such as butane and propane, for chemical feedstock.

A variety of factors have more than likely entered PTTGC’s decision making.

Available labor remains a concern as it was for Shell. Custer added that the project in Western Pennsylvania is said to be nearing its workforce peak of roughly 6,000 people, as Shell’s plant is on track to enter service in the early 2020s.

After PTTGC committed funding in 2015, EPC firm Bechtel was selected to lead one team of companies on the front-end engineering and design work. To maximize it options, PTTGC selected a second team led by EPC Fluor Corp. to conduct similar work. Bechtel is the main works contractor for the Shell project in Pennsylvania. More labor is expected to become available over the next year or two as that facility nears completion.

It’s also unclear if trade talks with China are factoring into the picture. Tariffs remain a major sticking point in U.S. negotiations. The U.S. imposed tariffs last year on a wide variety of chemicals, while China responded with those for various grades of polyethylene. The dispute has unsettled markets beyond both countries and has put multiple industries on edge.

Shell has repeatedly said it selected Appalachia not just for abundant feedstock, but also the fact that about 70% of the North American marketplace for polyethylene is within a 700-mile radius of its site in Western Pennsylvania. Jim Cooper, a senior petrochemical adviser at the American Petrochemical and Manufacturers trade group, said the same is likely true for PTTGC’s Ohio location, with most potential customers located in North America rather than in export markets overseas.

Additional storage for ethane, butane and propane is also seen as key to breathing more life into the region’s petrochemical industry. Different projects to store natural gas liquids (NGL) underground are being developed in the basin.

However, Goldman, Sachs & Co.-backed Mountaineer NGL Storage LLC is said to be close to starting construction, which would provide a major lift to private and public sector efforts to establish a Northeast liquids hub. Mountaineer’s project would be on the Ohio River in Monroe County near PTTGC’s proposed cracker. It had experienced regulatory delays in the state, where agencies like the Ohio Department of Natural Resources (ODNR) are unaccustomed to reviewing permit applications for underground salt cavern storage.

Mountaineer’s facility would be the state’s first to store liquids in the Salina salt formation. A major permit for Class III solution mining was issued to Mountaineer early last year, an ODNR spokesperson said. David Hooker, president of Mountaineer parent Energy Storage Ventures LLC, said the project appears to “have all the permits required to start construction, subject to a few conditions.” He added that the company is “aggressively” pursuing customers and hopes to start building later this year.

Mountaineer’s plans call for storage capacity of up to 3.5 million bbl, which could be expanded. The company plans to build in two phases. Four caverns in the Salina, each with a capacity of 500,000 bbl, are slated to come online in the first phase with another two or three caverns entering service later.

MONT BELVIEU MODEL

Proponents of an NGL storage hub want to link up Appalachian shale formations with a network of pipelines, equipment and underground storage. The hub, supporters say, could ease supply and demand imbalances and help create more regional buyers and sellers of the commodities, similar to the one that exists in Mont Belvieu, TX, which sits on a shallower salt dome used to store products.

The Department of Energy (DOE) last December released a report demonstrating the feasibility of developing a storage hub in Appalachia that would increase supply and geographic diversity for the nation’s petrochemical and plastics industries. The report also noted the potential for national security benefits in expanding the Northeast petrochemical industry as 95% of the country’s ethylene production capacity is located on the Gulf Coast.

To build on that report and ongoing efforts to establish an Appalachian hub, Sen. Joe Manchin (D-WV) introduced legislation this week that would require the DOE to further study how an NGL hub in Appalachia could bolster national security.

“The benefits of a natural gas liquids storage hub in Appalachia are abundant,” Manchin said. “It would be an economic driver for the region, would expand energy infrastructure and would increase our domestic production of the petrochemical resources we rely on.”

Manchin’s bill would require the DOE to conduct and complete the study in consultation with the U.S. Secretary of Defense and the Secretary of the Treasury within one year of enactment. It would also require an examination of the potential risks to national and economic security posed by foreign ownership and control of U.S. domestic petrochemical resources.

PTT Global Chemical pcl (PTTGC) and Daelim Industrial Co. continue to work toward sanctioning the multi-billion dollar ethane cracker proposed for southeast Ohio, a project spokesman said this week.

A final investment decision (FID) has been in the offing since 2015, when PTTGC committed $100 million for preliminary design work on the facility and initially expected to have a decision by 2017. The timeline was later pushed back to 2018 and passed. While no decision is imminent, pieces continue to fall into place that suggest the plant will ultimately get built, sources said.

Project spokesman Dan Williamson said PTTGC and Daelim are currently focused on selecting an engineering, procurement and construction (EPC) firm to build the massive facility. They recently contracted with a local business to remove trees from the proposed site. The project has also cleared all major regulatory approvals, having secured its air permit late last year from the Ohio Environmental Protection Agency.

PTTGC, Thailand’s state-owned petrochemical and refining company, partnered last year with Daelim to explore the plant’s feasibility and secure funding. South Korea-based Daelim Industrial is the parent of Daelim Group, a conglomerate that develops petrochemical facilities and power plants worldwide.

Shortly after the partnership was announced, PTTGC said it would nearly double the Ohio facility’s design capacity to 1.5 million metric tons/year of ethylene, or at least 500,000 metric tons/year more than it first announced. That announcement put the facility in line to produce the same amount of ethylene as Royal Dutch Shell plc’s ethane cracker, which is under construction in nearby Western Pennsylvania.

Shell’s facility is designed to consume about 100,000 b/d of ethane. Shell first floated the idea of building a cracker in Pennsylvania in 2011 and didn’t announce an FID until 2016. Both plants would convert ethane produced in the Marcellus and Utica shales to ethylene and polyethylene, both key building blocks for plastics.

PTTGC has purchased all of the nearly 500 acres it needs to build its plant at a site in Belmont County along the Ohio River. The company has secured commercial arrangements with producers for feedstock as well as those for utility supplies, product marketing and logistics.

NAI Spring’s Bryce Custer, a petrochemical and energy services real estate broker who works throughout the Ohio River corridor from Pennsylvania to West Virginia, said the consensus in the region is “yes” the plant will get built. Economist Ned Hill, who teaches at Ohio State University and has tracked the project, said people he has spoken with remain optimistic about a positive FID as well.

FULL SPEED AHEAD

“There’s a lot going on down there right now; nothing’s stopped,” Custer said of activity in the area near the proposed site. “If you would have asked me the same question three months ago, I probably would not have been quite as positive, but I’m positive again.”

Custer said NAI Spring is seeing more land activity in anticipation of PTTGC’s cracker being built. He said the firm is primarily working with international companies that don’t have a strong presence on the Gulf Coast, including plastics manufacturers and those interested in using other gases, such as butane and propane, for chemical feedstock.

A variety of factors have more than likely entered PTTGC’s decision making.

Available labor remains a concern as it was for Shell. Custer added that the project in Western Pennsylvania is said to be nearing its workforce peak of roughly 6,000 people, as Shell’s plant is on track to enter service in the early 2020s.

After PTTGC committed funding in 2015, EPC firm Bechtel was selected to lead one team of companies on the front-end engineering and design work. To maximize it options, PTTGC selected a second team led by EPC Fluor Corp. to conduct similar work. Bechtel is the main works contractor for the Shell project in Pennsylvania. More labor is expected to become available over the next year or two as that facility nears completion.

It’s also unclear if trade talks with China are factoring into the picture. Tariffs remain a major sticking point in U.S. negotiations. The U.S. imposed tariffs last year on a wide variety of chemicals, while China responded with those for various grades of polyethylene. The dispute has unsettled markets beyond both countries and has put multiple industries on edge.

Shell has repeatedly said it selected Appalachia not just for abundant feedstock, but also the fact that about 70% of the North American marketplace for polyethylene is within a 700-mile radius of its site in Western Pennsylvania. Jim Cooper, a senior petrochemical adviser at the American Petrochemical and Manufacturers trade group, said the same is likely true for PTTGC’s Ohio location, with most potential customers located in North America rather than in export markets overseas.

Additional storage for ethane, butane and propane is also seen as key to breathing more life into the region’s petrochemical industry. Different projects to store natural gas liquids (NGL) underground are being developed in the basin.

However, Goldman, Sachs & Co.-backed Mountaineer NGL Storage LLC is said to be close to starting construction, which would provide a major lift to private and public sector efforts to establish a Northeast liquids hub. Mountaineer’s project would be on the Ohio River in Monroe County near PTTGC’s proposed cracker. It had experienced regulatory delays in the state, where agencies like the Ohio Department of Natural Resources (ODNR) are unaccustomed to reviewing permit applications for underground salt cavern storage.

Mountaineer’s facility would be the state’s first to store liquids in the Salina salt formation. A major permit for Class III solution mining was issued to Mountaineer early last year, an ODNR spokesperson said. David Hooker, president of Mountaineer parent Energy Storage Ventures LLC, said the project appears to “have all the permits required to start construction, subject to a few conditions.” He added that the company is “aggressively” pursuing customers and hopes to start building later this year.

Mountaineer’s plans call for storage capacity of up to 3.5 million bbl, which could be expanded. The company plans to build in two phases. Four caverns in the Salina, each with a capacity of 500,000 bbl, are slated to come online in the first phase with another two or three caverns entering service later.

MONT BELVIEU MODEL

Proponents of an NGL storage hub want to link up Appalachian shale formations with a network of pipelines, equipment and underground storage. The hub, supporters say, could ease supply and demand imbalances and help create more regional buyers and sellers of the commodities, similar to the one that exists in Mont Belvieu, TX, which sits on a shallower salt dome used to store products.

The Department of Energy (DOE) last December released a report demonstrating the feasibility of developing a storage hub in Appalachia that would increase supply and geographic diversity for the nation’s petrochemical and plastics industries. The report also noted the potential for national security benefits in expanding the Northeast petrochemical industry as 95% of the country’s ethylene production capacity is located on the Gulf Coast.

To build on that report and ongoing efforts to establish an Appalachian hub, Sen. Joe Manchin (D-WV) introduced legislation this week that would require the DOE to further study how an NGL hub in Appalachia could bolster national security.

“The benefits of a natural gas liquids storage hub in Appalachia are abundant,” Manchin said. “It would be an economic driver for the region, would expand energy infrastructure and would increase our domestic production of the petrochemical resources we rely on.”

Manchin’s bill would require the DOE to conduct and complete the study in consultation with the U.S. Secretary of Defense and the Secretary of the Treasury within one year of enactment. It would also require an examination of the potential risks to national and economic security posed by foreign ownership and control of U.S. domestic petrochemical resources.