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Shell Chemical still deciding on plans for Pennsylvania feedstock plant

By: Frank Esposito

February 13, 2013

HOUSTON -- Officials with Shell Chemical LP are still trying to decide if they want to access the shale gas boom and build a plastic feedstock plant in western Pennsylvania.

Pittsburgh-based Horsehead Corp., the owner of the parcel of land where Shell has proposed the new plant, announced on Dec. 26 that it has given Shell a six-month extension for Shell to evaluate the site in Monaca, Pa.

Shell first announced its interest in the project in March 2012, saying that newfound supplies of natural gas in the region had led them to consider building an ethylene cracker that would use natural gas-based ethane as a feedstock. Downstream units making polyethylene resin also were being considered, officials said at the time.

In a Feb. 11 e-mail, Shell spokeswoman Kimberly Windon said that the Houston-based firm "continues to consider the possibility of building a petrochemical facility in western Pennsylvania."

"There are many hurdles to clear before we can even make an investment decision to build the proposed petrochemical complex," she added. "We need to confirm the suitability of the site, secure ethane feedstock supply, complete the engineering and design work, confirm the support of customers for our products, receive all the necessary permits and confirm that the project is economically robust and competitive."

"If the project goes forward, we fully expect to proceed with our preferred site in Pennsylvania, but we must complete a thorough environmental and technical review of the Horsehead location before we can confirm its suitability."

Horsehead currently operates a zinc-processing plant at the site, but plans to close that facility in late 2013 when it opens a new plant in North Carolina. If Shell had exercised its original option on the land, Horsehead would have been required to vacate the site by April 30, 2014. Shell's Windon declined to provide deadline dates for the new option, and Horsehead officials could not be reached for comment.

When asked about the possibility of Shell making PE resin at the site - which is about 35 miles northwest of Pittsburgh - Windon said that the firm "is in the preliminary stages of determining what derivatives we would manufacture at the proposed site."

"We are currently exploring different options on what the entire value chain will look like," she said in an e-mail, adding that the firm is looking at "the most efficient means of gathering, processing and extracting ethane, the best technology to convert the ethylene produced by the cracker to polyethylene and [PET feedstock] mono-ethylene glycol and the most efficient means of transporting and selling to customers."

Shell's original announcement surprised some in the industry, since U.S. petrochemical production for decades has been centered on the Gulf Coast of Texas and Louisiana, near existing feedstocks there. But the Marcellus Shale — a geological region covering parts of Pennsylvania, Ohio and West Virginia — now is believed to hold one of the largest natural gas deposits on the continent.

Shell already produces ethylene and related feedstocks at U.S. plants in Deer Park, Texas, and Norco, La. The firm hasn't been involved in the PE market since it sold off its ownership stake in Basell NV in 2005.

The ongoing natural gas boom has spurred several North American PE makers - including Formosa Plastics Corp. USA , ChevronPhillips Chemical Co. LP and Nova Chemicals Corp. to announce plans for new capacity, mostly at Gulf Coast locations. PE maker Dow Chemical also plans to add new ethylene feedstock capacity, but hasn't yet committed to increasing its PE production.

Startup firm Appalachian Resins also has entered the picture with plans to build a mid-sized ethylene and PE unit south of Wheeling, W. Va., about 75 miles southwest of the proposed Shell site in Monaca. AR officials plan to release details of that project by the end of the month.