A $6 billion ethane cracker plant coming to western Pennsylvania could bring thousands of new jobs to Ohio, including the Akron area’s plastics industry.
A subsidiary of Royal Dutch Shell announced plans Tuesday to build the plant on the Ohio River at Monaca in Pennsylvania’s Beaver County after studying the idea for four years.
The long-awaited decision could have sweeping implications for the petrochemical and plastics industries in Ohio, Pennsylvania and West Virginia, where some experts say tens of thousands of jobs could be created as a result. The news also makes it more likely Ohio could get its own cracker plant.
The cracker plant planned by Shell Chemical Appalachia LLC in Pennsylvania will turn ethane from drilling in the Utica and Marcellus shales into polyethylene for plastics, textiles, automotive components and pharmaceuticals.
Ethane is a low-cost natural gas liquid that serves as the U.S. chemical industry’s main feedstock.
The Pennsylvania plant would be the first cracker plant in the three states and the first major cracker to be built outside the Gulf Coast in the last 20 years.
That news comes as Shell has laid off workers and delayed other projects because of low commodity prices. The company is banking on chemicals moving forward. It had earlier agreed to expand a Gulf Coast cracker and another in China.
“This is the biggest of big news,” wrote Jim Willis, editor of the Marcellus Drilling News, a trade publication. “We’ve been waiting for this day for a LONG time.”
Marcellus Shale Coalition President David Spigelmyer said, “Shell’s decision to move forward with this world-class facility … is welcomed news, especially given the challenging market conditions.”
Shawn Bennett, executive vice president of the Ohio Oil and Gas Association, a statewide trade group, called Shell’s announcement “phenomenal news.”
It will create a new petrochemical industry in the three-state Appalachian Basin and its impacts on Ohio’s chemical and plastics industries will be “very substantial and very significant,” he said.
Shell’s news is “the announcement we’ve been waiting for,” he said.
Shell’s decision also makes it far more likely that Thai chemical company PTT Global Chemical will build its $5.7 billion cracker plant in Ohio’s Belmont County, said Andrew Thomas, executive in residence at the Energy Policy Center at the Maxine Goodman Levin College of Urban Affairs at Cleveland State University and an expert on the Utica Shale.
That company is looking at a site of an old coal-fired power plant at Shadyside — with a final decision expected late this year or early next year.
It is easier to operate two cracker plants in the same region because two plants offer operating efficiencies for cracker operators when pipelines or plant operations go down, he said. “It is easier to run two than one,” he said.
The Shell plant will also produce huge savings for other chemical companies and plastic makers that locate nearby because they will pay less for shipping, he said.
One change that will likely be needed is for cracker operators to sign long-term contracts of two to five years to purchase the ethane, Thomas said.
At present, they generally buy ethane on the spot market in order to avoid troublesome surpluses because there is little ethane storage in the three states, he said.
Construction on the Shell cracker could begin in 18 months and commercial production is expected “early in the next decade,” the company said. It would create 6,000 construction jobs and 600 permanent jobs.
The plant will use about 105,000 42-gallon barrels of ethane per day.
Shell picked the site in 2012 and purchased the main 340-acre tract, a one-time zinc smelter, in late 2014.
It spent $80 million to fix environmental problems at the site. It also paid $69 million to a local water authority to relocate a water intake and build a new water treatment plant.
Pennsylvania also granted tax breaks to Shell to build the plant.
Ohio had vied for the plant before the Beaver County site was chosen.
At present, ethane from the Utica and Marcellus shales is piped to the Gulf Coast for processing. Some ethane is also being shipped to the East Coast via pipelines where it is loaded on tankers and shipped to Europe and Asia.
Two other cracker plants in the Appalachian Basin have been proposed.
Braskem/Odebrecht, two Brazilian companies, are looking at a site near Parkersburg, W.Va., and a Texas-based company, Appalachian Resins, had been looking at a small cracker plant in Ohio’s Monroe County.
Bob Downing can be reached at 330-996-3745 or bdowning@thebeaconjournal.com.