CECIL TOWNSHIP, Pennsylvania – The Appalachian Basin, specifically the trio of states including Pennsylvania, Ohio and West Virginia, is approaching a tipping point when determining what is done with the substantial volume of ethane produced here.
There are three scenarios concerning ethane, according to Charles Zelek, a senior economist in the U.S. Department of Energy’s Office of Fossil Energy:
- Development of a petrochemical “cluster” so that much of incremental Appalachian ethane supply is processed locally
- As is the current situation, locally-produced ethane is shipped from the region to the U.S. Gulf Coast
- Incremental processing occurs elsewhere, facilitated by feedstock exports
“There is a bit of urgency for this region (concerning what is done with its ethane),” according to Zelek, who last week addressed more than 100 attendees at the third annual Appalachian Storage Hub Conference.
Zelek implored his audience – the region’s movers, doers and shakers – to move forward in establishing liquids storage in the Tri-State (in various stages of development by three groups), putting together a strong effort to attract the petrochemical industry, including additional crackers, and cracker product users.
More, more, more
That includes more private cracker owners, more private investment, and involvement of the federal government, as decentralizing the country’s petrochemical industry away from the Gulf Coast is important for national security, and for supporting the industry’s resilience and reliability.
The program, produced by Shaledirectories.com and TopLine Analytics was held south of Pittsburgh, in the heart of the wet Marcellus Shale play. Kallanish Energy was in attendance at the one-day conference.
Zelek, himself a local boy, having grown up in southeast Ohio, told his audience the growth in natural gas liquids production is no fluke and is not a mirage.
He pointed out Doe’s statistical arm, the Energy Information Administration, forecasts Ngpls (natural gas plant liquids, or liquids separated at natural gas processing, fractionating, and cycling plants) production jumps by 50% between 2017 and 2050.
Projected ethane production in 2025 is more than 20 times greater than regional production in 2013.
But right now, there is a very limited amount of pipeline capacity to move ethane and other gas liquids out of the area, be it east to Marcus Hook, Pennsylvania, northwest to Sarnia, Ontario, and southwest to the Texas Gulf Coast.
The only answer is rejection
As natural gas production continues to grow in Appalachia, there is only so much pipeline capacity to flow liquids, one ethane cracker is under construction, another is expected to soon be publicly given the greenlight, and liquids storage is non-existent.
The only answer is rejection – leave as much ethane in the natural gas stream as is allowed. “Roughly 750,000 barrels of ethane will be rejected this year,” according to Zelek.
Storage available for natural gas liquids is essential to managing seasonal supply variability, processing facility outages, and holding for transport or export, according to Zelek.
This is the place to be
The Doe senior economist said 13 key petrochemical industries, from plastic and resin manufacturing, to rubber product manufacturing, are within 300 miles of Pittsburgh, and reiterated what locals have been saying for years:
The liquids are here, the processing is here, fractionation is in the region, crackers are on the way, end users are here – bring on the liquids storage.
And bring on the petrochemical industry as a whole. The latest American Chemistry Council projects billions in capital investment, billions in direct output, over 100,000 jobs, billions in payroll, and billions in tax revenue.
China isn’t waiting
Back to Zelek speaking of “urgency.” The senior economist let his audience in on a little secret. China is primed to take all the ethane the U.S. can send the Red giant. More than 20 ethane crackers are applying for permits to operate in China, he said, based on data he was supplied the evening before his presentation.
Ethane demand for those crackers is pegged at well over 24 million tons per annum (Mtpa).
This post appeared first on Kallanish Energy News.