For Europe, Marcellus ethane is in the 'pipeline'

INEOS, a European chemical producer, will carry ethane from Marcus Hook to Europe. It is using its vessels as billboards. The message on this one: "Shale Oil for Manufacturing." PER OSKAR KJENDALEN
INEOS, a European chemical producer, will carry ethane from Marcus Hook to Europe. It is using its vessels as billboards. The message on this one: "Shale Oil for Manufacturing." PER OSKAR KJENDALEN
Posted: January 11, 2016

Next month, the first shipment of Marcellus Shale ethane will set sail from Marcus Hook to Norway, launching a new export trade for the Delaware River port that is being hailed as a boost to the gas industry, local maritime interests, and European manufacturing.

Sunoco Logistics Partners L.P. has committed $2.5 billion to the Mariner East pipeline network to transport ethane and other liquid fuels, such as propane and butane, across Pennsylvania from the Marcellus fields to that Marcus Hook terminal, erected on the site of a former oil refinery. The 300-mile system, now undergoing testing, will begin its first deliveries of ethane in the coming weeks, Sunoco says.

European chemical producer INEOS has spent $1 billion to complete the link between Marcus Hook and Europe by creating a "virtual pipeline" of 575-foot tankers to ferry ethane across the Atlantic to petrochemical plants in Norway and Scotland.

"The start of ethane shipments on Mariner East 1 represents the next phase of the project and a re-orienting of the Marcellus and Utica Shale resources to benefit Pennsylvanians directly, through local use, while strengthening the state's economy through access to other markets, both domestic and international," Sunoco Logistics spokesman Jeffrey P. Shields said.

Natural-gas liquids are to petrochemical manufacturing as wheat is to baking. In that sense, the Marcellus and Utica Shales in Pennsylvania, West Virginia, and Ohio are metaphorical amber waves of ethane.

"We have seen how U.S. shale gas revolutionized U.S. manufacturing, and we believe these huge ships will help do the same for Europe," British industrialist Jim Ratcliffe, founder and chairman of INEOS, said when the first two of eight tankers were launched in July.

The Chinese-built INEOS tankers will load up at Marcus Hook and deliver cargo to plants whose current ethane supplies are dwindling from depleted North Sea oil wells. The INEOS plant in Grangemouth, Scotland's largest industrial complex, now operates at half-capacity.

A second, parallel Mariner East pipeline, set to be built this year and opposed by many landowners along the route, would quadruple the capacity of Marcellus liquids moving to Marcus Hook. When the pipeline is ready, European petrochemical maker Borealis is poised to ship ethane to a Swedish plant.

Eventually, maritime officials project, ethane may add up to 100 more tankers a year to Delaware River traffic.

Dennis Rochford, president of the Maritime Exchange for the Delaware River and Bay, also anticipates that the availability of new Marcellus energy supplies could trigger a "rebirth of manufacturing in the region that would contribute to a growth in blue-collar jobs not directly related to the port."

INEOS sees the future of petrochemicals in hydraulic fracturing, the method that involves the high-pressure injection of water and chemicals into shale formations to release oil and gas. The company is invested in developing shale wells in Britain, which have aroused fierce environmental opposition.

For INEOS, the tankers arriving from Marcus Hook bringing salvation for its Scottish plant will serve as aquatic billboards for fracking. The company has emblazoned the ships' hulls with massive slogans: "Shale Gas for Manufacturing" and "Shale Gas for Chemicals."

"They make very clear statements as to the benefits of shale," said INEOS spokesman Richard Longden.

One of several hydrocarbon molecules that make up natural gas, ethane is converted or "cracked" into ethylene at huge industrial complexes. Ethylene is a foundational ingredient in many consumer products, including antifreeze and plastics.

Ethane is produced in such abundance from some shale wells in Appalachia that gas producers have scurried for more than five years to develop markets for it.

For Sunoco Logistics, ethane presented an opportunity. So the company, acquired in 2012 by pipeline giant Energy Transfer Partners, repurposed two underused fuel pipelines to carry natural-gas liquids.

One pipeline, called Mariner West, now exports ethane from Pennsylvania through Ohio and Michigan to Sarnia, Ontario, where Nova Chemicals converted a plant to consume Marcellus ethane. Mariner East, the second ethane route, is an 8-inch-diameter pipeline stretching from the Pittsburgh area to Marcus Hook. It once delivered gasoline and diesel refined at Marcus Hook to Western Pennsylvania.

Last year, Sunoco Logistics began shipping propane through the Mariner East line. The added infrastructure it needed to transport and store ethane is now completed, including a 300,000-barrel above-ground insulated tank in Marcus Hook supercooled to minus-130 degrees to maintain the ethane in a liquid state.

While Pennsylvania's business and political establishment have lined up behind the pipeline project, citing the economic benefits, environmentalists have opposed it, saying the pipeline will enable more drilling for fossil fuels and that it and its products will increase greenhouse-gas emissions.

Many landowners along the Mariner East pipeline route also object. The pipeline across Pennsylvania was constructed in the 1930s, but some of the rural areas it crosses are now suburban developments. Now, Sunoco Logistics is adding one and maybe a second 24-inch-

diameter pipeline next to the first Mariner East pipeline, which will require it to expand its right-of-way. It recently opened an office in Chester County to persuade reluctant landowners there and in Delaware County to sign easements.

The Mariner East 2 project would expand the capacity to move Marcellus liquids from 70,000 barrels a day to 340,000 barrels. Though much of the material will be exported, some propane is distributed to local markets. And Sunoco says it also is developing a plant in Marcus Hook that would convert propane into propylene, also a building-

block commodity in the petrochemical industry.

Sunoco Logistics CEO Michael J. Hennigan acknowledged to investors in November that the propane plant has taken longer to develop than expected because of a worldwide collapse of commodity and oil prices.

"We're disappointed that the commodity environment is kind of slowing things down for a little bit," he said, "but we're bullish that that's going to turn around."

amaykuth@phillynews.com

215-854-2947@maykuth

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