Newest delay for Belmont County cracker reinforces need to seek out new economic development strategies
Press Release from Sean O’Leary, Ohio River Valley Institute, February 18, 2021
JOHNSTOWN, PA – Today’s statement in the Bangkok Post by PTTGC chief executive Kongkrapan Intarajang saying the company will need more time to find ways to reduce the cost of the ethane cracker project proposed for Belmont County, Ohio and find a new business partner is just the latest indication that the project as well as the envisioned buildout of a massive petrochemical industry in Appalachia is unlikely to go forward.
That was the key finding at a recent online forum hosted by the Ohio River Valley Institute in which experts from finance, the petrochemical industry, and policymaking examined market conditions and trends in public policy, both of which suggest an increasingly bleak outlook for this project and for expansive petrochemical development in the region.
Kathy Hipple, Finance Professor at Bard College’s MBA in Sustainability and a former financial analyst at the Institute for Energy Economics and Financial Analysis, was a participant in the forum and said in response to today’s story in the Bangkok Post, “Today’s announcement that PTTGCA has further delayed its investment decision is an acknowledgment of the increasingly difficult economics of the global virgin plastics industry. The company spent months trying — and failing — to find a partner to share the risks of building a multi-billion dollar petrochemical complex in Ohio. This latest market signal suggests the Thai-based company, which reported a huge drop in both revenues and earnings in 2020, is not in a financial position to undertake the project on its own, and risks stranding assets should it pursue an unwise investment decision.”
Petrochemical industry analyst and forum participant Anne Keller observed, “PTTGC’s 2021-2025 year capital spending plan will shift Thailand’s position in the global ethylene market from being a net importer to being an ethylene exporter. The company now faces a different market dynamic for its potential US production. A position as a merchant exporter of US ethylene, selling in a global market, requires relentless focus on low costs. This heightens the risk of the US project and the need to challenge costs, all under the shadow of a likely rise in interest rates.”
Another forum participant and former Pennsylvania Secretary of Environmental Protection John Hanger said, “Stoking hopes for this always delayed, but never built cracker plant is the very worst economic development policy possible. It is past time to move on to real investment and job creation in energy efficiency, electrifying transportation, and clean energy.”
Ohio River Valley Institute Executive Director, Joanne Kilgour, added, “Investors are becoming increasingly wary of the petrochemical industry and major companies like BP are divesting their global petrochemical business. It is time for local and regional policymakers to take a hard look at past decisions that put all of their economic development resources into the false promises of the oil and gas and petrochemical sector and embrace new, diverse strategies for more resilient local economies and healthier communities.”
Many of these issues were first raised in June of 2020 in a letter to the governors of Ohio, Pennsylvania, and West Virginia that was written by a group of economists and policy analysts that included Mr. Hanger.
The letter, which called the vision of a new petrochemical hub in the region “an economic non-starter,” cited “economic and technological barriers, which are likely to outlast the current economic crisis and make the construction of more crackers in the Ohio Valley and Southwestern Pennsylvania highly unlikely.” The letter went on to say, “. . . projects that depend on a buildout of four to five crackers, including development of large natural gas liquids storage facilities such as the proposed ASH (Appalachian Storage Hub) and a major expansion of the downstream plastics manufacturing sector, are unlikely to be realized as are the jobs they are expected to provide.”
More about the challenges facing the dream of a petrochemical buildout in Appalachia, the unlikelihood that a buildout would produce the kind of job growth and prosperity claimed by the industry, and the need for state and regional leaders to pursue better, more sustainable economic development strategies can be found at the OhioRiverValleyInstitute.org.
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Our mailing address is:
Ohio River Valley Institute
216 Franklin Street, Suite 400
Johnstown, Pennsylvania 15901
Contact is Sean O’Leary, sean@OhioRiverValleyInstitute.org
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