Falcon Ethane Pipeline for Shell’s Cracker in Beaver County, PA
From an Article in the Marcellus Drilling News, March 23, 2018
Tom Gellrich, founder of Top Line Analytics–a consultancy focusing on downstream shale gas development like ethane crackers–spoke Wednesday at Kallanish Energy’s “Crackers, Storage & Pipelines 2018” event at Southpointe. He had some interesting things to say. Among them: The Marcellus/Utica region has enough ethane to easily support up to eight ethane cracker plants–plants the size of the massive Shell cracker being built now in Monaca (Beaver County), PA.
So far only Shell has pulled the trigger and begun to build such a plant. PTT Global Chemical, based in Thailand, is actively considering (and likely) to build a second regional cracker plant in Belmont County (Ohio). So the multi-billion question is this: Why aren’t more companies building crackers in our region, given the abundance of cheap ethane? Gellrich had some thoughts on that…
The reasons why there haven’t been any more ethane crackers announced for Appalachia — and the critical importance of large-scale storage to support the region’s burgeoning petrochemical industry — were big topics of discussion at an industry gathering Wednesday.
The bottom line: The $3 billion to $6 billion that it costs to build an ethane cracker has to be approved by someone, and it’s a big commitment that would be extremely costly and potentially fatal to a company if it didn’t work out.
“It is a bet-the-company and certainly bet-your-career,” said Tom Gellrich, founder of Top Line Analytics, a consultancy that focuses on downstream shale gas development like ethane crackers. Gellrich spoke at a pipeline and midstream conference held Wednesday at Southpointe by Kallanish Energy, a daily global energy news and analysis website.
So far only Shell Chemicals, the division of Dutch multinational Royal Dutch Shell has made that billions-dollar commitment with the cracker it’s building in Beaver County. PTT Global Chemicals is moving to a final investment decision on a second potential cracker in Belmont County, Ohio.
Gellrich said his estimate is there’s enough ethane — a byproduct of natural gas production that is critical in the production of plastics — for eight crackers. He said five crackers, including Shell’s, could realistically be built.
But that depends on a lot of factors, including the building of infrastructure to pipe ethane to petrochemical plants and the as-yet-unbuilt ethane storage hub. Despite Shell’s big investment and marketing by Pennsylvania and others about the abundant supply of ethane in natural gas production — as well as a Shale Crescent USA study released Tuesday that shows the cost advantage of an Appalachian petrochemical industry and the proximity to major petrochemical markets — it’s not an easy case to build.
“It’s a very tough time for business development right now,” said Timothy E. Hanley, vice president of business development at Energy Storage Ventures. ESV and its subsidiary Mountaineer NGL is building the first ethane storage facility in Appalachia in a site in Ohio about 35 miles south of Wheeling, W.Va. While Mountaineer NGL isn’t currently supplying Shell — it’s relying on a custom-built, 94-mile pipeline and real-time delivery of ethane — Mountaineer NGL would be the operational ethane storage for nearby PTT Global Chemicals plant.
Another big factor cited by Gellrich and Hanley: It’s a lot less risky to build ethane crackers along the Gulf Coast, where there’s existing infrastructure, supply and a tradition going back decades. That comfort level makes it easier to discount the cost benefits to being near the supply.
“When you develop in the Gulf, you’re bolting to a system that’s already in use,” Hanley said. “Here, it’s (on) a blackboard (at the present time).”
Gellrich agreed. “It’s a lot easier to build on the Gulf Coast where they know how this works,” Geller said. “There’s an infrastructure.”
Hanley said Gulf Coast companies don’t want to see large-scale petrochemical production in Appalachia but would instead have the ethane shipped by pipeline to the Gulf Coast. That’s why Shell’s decision — and its success once production gets underway at the plant next decade — is so important, Gellrich said.
“Everybody’s watching Shell,” Gellrich said. “Everybody’s watching what’s going on.”*
*Pittsburgh (PA) Business Times (Mar 21, 2018) – Billion-dollar question: Why aren’t more crackers being built in Appalachia?
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ETHANE FROM MARCELLUS-UTICA REGION EQUIVALENT TO EIGHT CRACKERS
FROM: Inside Shale, WAJR, 1440 AM, March 27, 2018
1 Cracker for Shell Plant in PA (100,000 bbl/day of ethane), planned
1 Cracker in Mariner West (NOVA Chemical, Sarnia, Ontario, Canada) and Mariner East (Marcus Hook, PA, exports to Europe), current
1 Cracker equivalent in ATEX Pipeline to Gulf Coast, current
3 Cracker equivalents being retained in natural gas, current
2 Cracker equivalents in gas production growth to 2020, projected
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8 Cracker equivalents of ethane (100,000 bbl/day), estimated
Source: Tom Gellrich, Top Line Analytics
NOTE: The Mariner East 2 (and 2 Plus) are under construction. The public comment period is now open for the Falcon Ethane Pipeline thru OH, WV and PA to supply the Shell Cracker in the Ohio River valley of western Pennsylvania.
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Shareholder Group Urges Shell to Go Green
By Olivia Rosane, EcoWatch.com, March26, 2018
PHOTO IN ARTICLE — A Shell station with an EV charging station in Tumwater, WA. (Washington State Dept. of Transportation)
When the shareholders of Royal Dutch Shell convene for their annual meeting this May, there will be a surprising item on the agenda.
A group of climate activists from the group Follow This, which urges people to buy shares in Shell in order to push the company towards renewable energy, will present a resolution urging the company to meaningfully increase its commitment to fighting climate change, the Financial Times reported Sunday.
Compared to other fossil fuel companies, the Financial Times reported that Royal Dutch Shell has taken a leadership role in greening the industry. In what it claimed was an effort to align itself with the Paris agreement, it committed in November to reduce its carbon footprint by 50 percent by 2050 and, in budgeting its footprint, included both its own emissions and those released in the use of its products.
However, the members of Follow This are among those who think Shell’s commitment will not be enough to keep global warming well below two degrees Celsius.
“The ambitions announced by Shell are inconsistent with the Paris agreement, in particular when taking into account expected global energy demand growth,” Follow This founder Mark van Baal told the Financial Times.
Activists told the Financial Times that, according to the International Energy Agency and the Intergovernmental Panel on climate Change, global carbon emissions need to decrease by 60 to 65 percent by 2050 in order to meet the Paris goals. However, as long as Shell has a share in the global energy market, which is projected to grow by 50 percent by 2050, its promise will only lead to a 25 percent reduction in emissions over all.
The Follow This resolution calls on the company “to set and publish targets that are aligned with the goal of the Paris Climate Agreement to limit global warming to well below 2°C,” and insists that those targets “need to include long-term (2050) and intermediate objectives, to be quantitative, and to be reviewed regularly.”
But Follow This‘ ultimate goal is to transform the kind of energy company that defines Shell.
“We will accomplish our mission when Shell’s CEO Ben van Beurden says, ‘Starting now, we are going to invest in sustainable energy so that Shell will become an entirely sustainable energy company.’” their website says. The group also wants Shell to invest the money it does still earn from fossil fuels into developing renewable energy instead of conducting more oil and gas exploration.
According to the Financial Times, Shell has a budget of $25 to $30 billion a year, but only invests $2 billion of that sum in renewable energy.
The company told The Financial Times they had received Follow This‘ resolution; the majority of shareholders voted down a similar resolution from the group last year.
Follow This‘ strategy represents a different way to exert pressure on the fossil fuel industry than the efforts of Oakland and San Francisco to sue five major fossil-fuel-producing companies, including Shell, for the costs associated with adapting to climate change.
The five companies involved in the suit filed a motion last week to have the case dismissed.
Study verifies Appalachia’s petrochemical advantage
By Kevin DiGregorio, Charleston Daily Mail, April 3, 2018
It’s nice when someone else’s data corroborates your own newfound conventional wisdom. It’s icing on the cake when that same data reverses the more longstanding conventional wisdom of others.
Since the development of the Marcellus shale, we have known that West Virginia and the Appalachian Region, including Pennsylvania, Ohio and Kentucky, offer significant economic advantages for petrochemical investments. That knowledge was based on intuition, experience and insight.
On the other hand, the decades-long conventional wisdom of others clashed with our understanding, suggesting that any major U.S.-based petrochemical investment should be made in the Gulf Coast. That knowledge was based on tradition, history and decades of profits from just such investments.
But neither our newfound wisdom nor the old, traditional wisdom was based on hard economic data and comparisons.
That has changed. Shale Crescent USA recently released a new study by IHS Markit that shows the most profitable place to build a large petrochemical facility is no longer the Gulf Coast. Instead, it is Appalachia.
Importantly, the report provides the kind of data that petrochemical executives need to make multibillion dollar investment decisions, and the bottom line from that is simple and quite significant.
A new $3 billion ethane-to-ethylene-to-polyethylene facility in the Appalachian Region would generate $3.6 billion more in pre-tax profits over 20 years compared to a similar facility in the Gulf Coast.
In other words, Shell, which is building a cracker plant near Pittsburgh, is going to make lots of money, especially if you consider that their investment — and thus the return on that investment — is much higher than the $3 billion scenario laid out by IHS Markit. PTT Global and its new partner, Daelim Chemical, are in the same financial boat, assuming they move forward in Belmont County, Ohio.
And Braskem, if they decide to build in West Virginia, along with any other petrochemical giant that makes the good financial decision to come to the region, will be poised to make large profits as well.
And yes, we already knew that. Sort of. We have been touting it for some eight years now as our newfound conventional wisdom suggested — quite strongly — that the Appalachian region held significant economic advantages for ethane crackers and downstream manufacturing facilities.
How did we know? We have the most abundant and cheapest feedstock in the world thanks to the Marcellus and other shale plays. We also don’t have to transport ethane for long distances (say, to the Gulf Coast) and then turn around and send the product (mostly polyethylene) back to the Midwest and Northeast where some two-thirds of polyethylene users are located.
It’s that simple. It’s that intuitive. Experience and insight tells you so. But Shale Crescent took the matter out of the realm of just intuition and experience and put it in the realm of hard numbers.
Get this. The independent study by IHS Markit, a leading provider of information and analysis for executives and decision-makers, quantified the Appalachian feedstock advantage, showing that ethane costs are 32 percent lower in Appalachia compared to the Gulf Coast. IHS Markit also showed that the delivered costs of polyethylene, taking transportation into account, are 23 percent lower in Appalachia.
The upshot? A $3 billion ethane-to-polyethylene project in Appalachia provides a pre-tax cash flow of $11.5 billion from 2020 to 2040 compared to $7.9 billion in the Gulf Coast. That’s where the additional profit of $3.6 billion comes in.
And remember, that’s for a $3 billion facility and not for a $6 or even $10 billion facility. You can bet any such investment will last much longer than 20 years as well, increasing the long-term profits substantially.
As you might expect from an extensive report, there’s even more to the story and analysis than just that. For example, IHS Markit considered both high- and low-price environments along with various capital costs, operating rates, market access variations and other risk factors as well.
And the study took into account higher capital costs for an ethylene facility and the less-developed infrastructure for pipelines and storage in Appalachia. Of course, that’s something we are addressing with the Appalachia Storage and Trading Hub, so in time, that disadvantage will at least be minimized if not eliminated.
But no matter how you slice the numbers and assumptions, the bottom line is clear. The most profitable place to build a large petrochemical facility is no longer the Gulf Coast. Instead, it is Appalachia.
It’s nice that we’ve known that for some time, but it’s even better that we now have the numbers to back it up.
>>> Kevin DiGregorio is executive director of the Chemical Alliance Zone.
LyondellBasell, Braskem end merger talks
By Marissa Luck, mySanAntonio.com, June 5, 2019
After nearly a year of talks and significant delay, petrochemical makers LyondellBasell and Braskem have mutually ended talks over a potential merger.
The Houston petrochemical maker said Tuesday morning it ended talks with Braskem’s controlling shareholder, the Brazilian construction company Odebrecht, after more than a year of negotiating to buy Braskem, valued at $13 billion. Odebrecht SA was part of a sweeping corruption investigation called “Operation Car Wash” that also ensnared Braskem and another one of its owners, Brazilian state-owned oil company Petrobas.
“The combination of LyondellBasell and Braskem is compelling because of the companies’ complementary strengths, product portfolios and operational footprints. However, after careful consideration, we jointly decided not to pursue the transaction. We want to thank the teams at Odebrecht and Braskem for their cooperation during the entire process,” said LyondellBasell CEO Bob Patel in a statement.
Patel did not elaborate why both parties had ended talks after months of discussions. In April, Patel had said talks had regained momentum after months of delay. At the time, Patel said part of the delay stemmed from wanting to see the results of the Brazilian presidential elections last year and how that would affect the future of Brazilian Petrobas. Petrobas is the main supplier of naphtha for Braskem in Brazil. Naphtha is an oil-based building block used to make petrochemicals.
A delay in signing the long-term supply contract of naptha also has slowed down talks, Reuters reported. Lyondell had also reportedly been waiting for Braskem to filed a 2017 annual report with the U.S. Securities and Exchange Commission before closing the deal, a source told Reuters.
But in May, Braskem said it would be delisted from New York Stock Exchange after it failed to file its 2017 annual report on time. Braskem said in SEC filings that it would appeal the de-listing decisions. The Brazilian petrochemical maker said it would “continue to seek opportunities with the potential to create value for the company.”
On Tuesday Patel said LyondellBasell is still focused on growth.
“We remain focused on advancing our disciplined, value-driven growth strategy. In addition, we intend to expedite our share repurchase program, which currently allows for the repurchase of up to 37 million of our outstanding shares. Our strong cash flows, ample liquidity, and healthy balance sheet allow us to deliver a growing, top-quartile dividend, advance organic growth, and maintain optionality for M&A opportunities while executing these significant opportunistic share repurchases,” said Patel in a statement.
https://www.mysanantonio.com/business/energy/article/LyondellBasell-Braskem-end-merger-talks-13933334.php