Shell Chemical says the development of a major plastics and petrochemicals complex under construction near Pittsburgh remains "important" to its overall global effort, despite a report that questioned its viability.
In an email to Plastics News, Michael Marr, Shell business integration lead, responded by saying that Shell's chemicals business at Monaca, Pa., "enjoys strong fundamentals" and that the Pennsylvania project "is an important part of our global effort to build-out new business models that will allow Shell to participate and thrive in the energy transition."
He added that the project "is particularly advantaged given its proximity to customers and abundant, inexpensive feedstock."
"We look forward to being operational in the early 2020s," Marr said. "The short-term outlook for this business is challenging given global macro conditions but it remains our view that long-term demand for the wide variety of products derived from petrochemicals will continue to grow and provide attractive returns."
But a research group says the complex "faces a combination of risks that weaken its anticipated financial performance," officials with the Institute for Energy Economics and Financial Analysis said in a June 4 news release about the 35-page report.
"Given the critical importance of the complex to the host communities and the state, Shell has an obligation to acknowledge the project's potential shortfalls," they added. "Its public partners, who have opened their doors and provided numerous incentives to bring it to fruition need an explanation."
IEEFA is a Cleveland-based research group. IEEFA finance director Tom Sanzillo added in the release that the current economic climate "poses additional risks for this investment."
"When the complex opens, its operating environment will test Shell's partnership with its public partners," he added. "This complex will not be as profitable as originally presented. This was true even before the coronavirus pandemic and has significant implications for jobs, taxes and economic spinoffs."
Sanzillo also said that "only increased public disclosure by Shell can ensure that problems are faced squarely and with common sense."
In the last decade, billions of pounds of capacity for polyethylene resin and related products have been added on the U.S. Gulf Coast to take advantage of low-priced shale gas feedstock. But in the last year, companies including LyondellBasell, Sasol Ltd., Dow Inc. and ExxonMobil Chemical have scaled back projects or announced reductions in capital spending. PTT Global Chemical and Daelim Industrial Co. also have delayed work on a similar joint project in Ohio not far from the Shell complex.
Shell began construction in Monaca in late 2017. The 386-acre project will be the first U.S. petrochemicals project built outside of the Gulf Coast in several decades. The complex will use ethane from shale gas produced in the Marcellus and Utica basins to make around 3.5 billion pounds of PE resin per year.
The complex will include four processing units, an ethane cracker and three PE units. Most of the resin made in Monaca is expected to be sold to Shell customers within North America. By comparison, most of the new PE capacity added on the Gulf Coast is being targeted at export markets.
Shell suspended most of the work at the Monaca site in mid-March because of concerns about the spread of COVID-19. At the time, more than 8,000 workers were at the site in Monaca, Pa.
The firm began adding about 300 workers per week during the week of May 4. The site now is using procedures to keep workers safe, including temperature screening and lunchroom protocols that allow workers to maintain social distancing.
Shell Chemical is a unit of global energy firm Royal Dutch Shell. The business is based in The Hague, Netherlands, with U.S. headquarters in Houston.