CLEVELAND (March 26, 12:30 p.m. ET) — Ohio, Pennsylvania.
It matters little to Ohio's plastics and specialty chemical industry that a new production plant for their raw materials will be built in Pennsylvania rather than Ohio.
Neither state lines nor the Ohio River will be enough to keep the materials from running their course into Ohio's supply chain, said Jack Pounds, president of the Ohio Chemistry Technology Council.
The chemical and plastics industries have been salivating over a new source of raw materials since talk surfaced last year about the construction of a major production plant — known as a “cracker,” because it “cracks” apart some of the compounds in natural gas and other liquids into their components — in Ohio, Pennsylvania or West Virginia.
Shell Oil Co. on March 15 announced it will build the plant, expected to cost as much as $3 billion, in Beaver County, Pa., just across the state line south of Youngstown. It has yet to announce a start date for construction on the plant, which will process natural gas and related liquids that are beginning to be pumped from Ohio's Utica Shale deposit.
The site selection was a disappointment for Ohio, which had hoped to lure the plant to the Buckeye State and to staff it with Ohio workers. But it will make little difference to Ohio's chemical industry or its approximately 42,000 employees, Pounds said.
“Being Ohio-based, we'd have loved to have seen it in Ohio, but in terms of the economics and the supply of raw materials to companies in Ohio, having it just across the border is not going to make any difference,” he said.
“For the liquids we're interested in — the ethanes and butanes coming out of there that will generate the feedstocks we need — it does not matter that much technically to have it in another state,” Pounds said.
The entire nation's plastic industry has been getting excited about the project.
Last November, Pounds' national counterpart, American Chemistry Council president Cal Dooley, toured the Midwest touting the benefits of shale gas for his industry. His organization predicts a 24% increase in the production of ethane, the main component of natural gas from which many other specialty chemicals are derived. That increase would drive an estimated $16 billion in new capital investments by the U.S. chemical industry to exploit the new production, he said, with Ohio serving as a leading state in the charge.
Now that vision is apparently coming true.
It would have been different if the plant had been sited a great distance away, such as on the Gulf Coast, because many of the chemicals it will produce don't travel well or have long a long shelf life, Pounds said. But a trip of a couple hours from Pennsylvania won't be any worse than a trip of a couple hours within Ohio's borders, he said.
Going forward, Pounds said he expects to see his industry grow significantly in Ohio once the cracker starts producing raw materials. He said Ohio has the companies, the work force and the expertise to leverage its proximity to such a source of raw materials like almost no other state can.