Intriguing possibility for Pa.'s excess shale gas

Posted: July 03, 2011

At some point this year - it may have already happened - production of Marcellus Shale natural gas will exceed Pennsylvania's demand for the fuel. The state will become a net exporter of natural gas.

If current trends continue, annual Marcellus output could quintuple by 2020, making Pennsylvania the second-largest producer behind Texas, according to Timothy J. Considine, a University of Wyoming energy economist, who has cowritten several bullish studies on shale gas.

Where will the gas go?

Power plants could consume more gas to produce electricity, displacing coal. Natural gas vehicles might replace some diesel and gasoline transport. A few entrepreneurs are even talking about shipping liquefied gas to overseas markets.

But economic-development officials envision some gas staying in the region and fueling a revival of energy-intensive manufacturing, the type of industry that thrived here when coal was king.

"I would say that it is not too early to consider petrochemical manufacturers' locating to Pennsylvania, which now produces more gas than it consumes," said Considine.

Last month, Shell Oil Co. announced that it was exploring building a "world-class" facility to make ethylene from Marcellus Shale gas. Ethylene is one of the major building blocks in the petrochemical industry, an ingredient in a variety of chemicals and plastics, including the polyethylene used in milk jugs and soda bottles.

Ethylene is produced at refinery-size plants that convert, or "crack," ethane derived from natural gas. An ethane cracker costs a billion dollars or more to build - it's not a casual investment.

"The huge capital cost of an ethane cracker would be an affirmation that there is going to be ethane for decades to come," said Kathryn Z. Klaber, president of the Marcellus Shale Coalition, an industry trade group.

Other interested parties

Shell is not the only company that has announced an interest in ethylene. Carlos Fadigas, the chief executive officer of Braskem S.A., a Brazilian chemical company with U.S. headquarters in Philadelphia, told reporters in April that Braskem was considering expanding into ethylene. Sasol Ltd., the South African synthetic-fuels pioneer, has also been mentioned as scouting eastern U.S. locations.

PetroLogistics L.P., a Houston company that had explored building an ethane cracker in Appalachia, is no longer interested, said Hank Jeans, senior vice president of commercial development.

An ethane cracker is often accompanied by other industries that convert the chemical into derivative products. Shell says it might integrate one or more derivative units to consume its ethylene production.

"One cracker would probably attract another two, three, or four derivative industries to buy the ethylene," said John Stekla, director of ethylene studies with Chemical Market Associates Inc. in Houston. "In total production, it's a lot of jobs. It's a huge economic boost."

The prospect of a big industrial expansion in Appalachia has triggered a competition of sorts among rival states.

'Wet' natural gas

Ethane is derived from the "wet" natural gas produced from Marcellus wells in Western Pennsylvania, West Virginia, and Ohio. Wet gas includes compounds such as propane and butane that must be separated from the natural gas before it is piped to markets.

An ethane cracker would likely be located near the source of the ethane.

"Yeah, we are in competition with surrounding states," said Gene Barr, spokesman for the Pennsylvania Chamber of Business and Industry. "There's a lot of wet gas in Ohio."

West Virginia is emerging as the early front-runner for the ethylene plant. Bayer Corp., the German pharmaceutical and chemicals producer that has its U.S. headquarters in Pittsburgh, is in "serious discussions" with several prospective ethylene producers to build on sites adjoining Bayer plants in New Martinsville and Institute, W.Va., said Bryan Iams, a Bayer spokesman.

Iams said its project has received support from West Virginia Gov. Earl Ray Tomblin, who formed a Marcellus to Manufacturing Task Force in February to develop opportunities for end users of natural gas.

The growing supply of shale gas - it now accounts for 25 percent of the domestic market - might revive the U.S. chemical industry, which has suffered from a shift to overseas production.

"Natural gas really is an opportunity to reinvigorate investment in the chemical industry in America," said Iams.

The Marcellus ethane might find other outlets, including pipelines to carry the material to existing crackers in Canada and the Gulf Coast.

Sunoco Logisitics Partners L.P. last year announced plans to carry ethane in its existing pipelines to the Philadelphia area, where it would be loaded on ships to the Gulf Coast.


Contact staff writer Andrew Maykuth at 215-854-2947 or amaykuth@phillynews.com.

 

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