Shell Commits to Building a Billion Dollar Chemical Plant in the Marcellus Region of U.S.

Royal Dutch Shell, one of the largest energy companies in the world, announced on Monday that it will build a “world-scale” chemical plant in the Marcellus region of the United States. The chemical plant is called a “cracker” and typically costs more than a billion dollars to construct. Its construction would provide thousands of both short-term construction and long-term operations jobs. Both West Virginia and Pennsylvania have been actively courting chemical companies to build one or more cracker plants in their states (see this MDN story).

The cracker plant would take advantage of one of the byproducts of Marcellus Shale drilling—ethane—which is converted to the hydrocarbon ethylene. Ethylene is a “feedstock” (or raw material) used to make plastics, including polyethylene, the most manufactured and widely-used plastic in the world (see MDN’s brief petrochemical primer here).

Shell already owns and operates four cracker plants in the U.S., two in Texas and two in Louisiana. While Shell’s plans for the Marcellus were unexpected and “below the radar,” they are certainly welcomed by WV and PA who are both eager to have the plant built in their respective states. Shell did not comment on when (and where) construction would begin.

Shell’s press release announcing the cracker plant

Shell is developing plans to build a world-scale ethylene cracker with integrated derivative units in the Appalachian [Marcellus] region of the United States.

The cracker would process ethane from Marcellus natural gas to produce ethylene, one of the primary building blocks for petrochemicals. Shell is evaluating derivative choices and the leading option is Polyethylene (PE), an important raw material for countless everyday items, from packaging and adhesives to automotive components and pipe. Most of the PE production would be used by northeastern US industries.

“Building an ethane-fed cracker in Appalachia would unlock significant gas production in the Marcellus region by providing a local outlet for the ethane,” said Ben van Beurden, Shell Executive Vice President Chemicals. “This fits well with our strategy to strengthen our chemicals feedstock advantage and would be another step in growing our chemicals business to meet the increasing demand for petrochemicals.”

Demand for PE in North America is expected to grow, so the economic and efficiency benefits of a regional cracker make this configuration attractive. As a leader in gas technologies, Shell has an array of long-term options to monetize natural gas. Extracting ethane and other natural gas liquids for petrochemicals production is one of these options that also include developing shipping solutions for LNG (liquefied natural gas); proprietary gas-to-liquids technology to produce fuels, lubricants and chemicals; and gas-for-transport in markets focusing on heavy duty vehicles, marine and rail transportation.

“US natural gas is abundant and affordable. Shell has the expertise and technology to responsibly develop this vital energy resource, including associated products such as polyethylene for the domestic market,” said Marvin Odum, President, Shell Oil Company. “With this investment, we would use feedstock from Marcellus to locally produce chemicals for the region and create more American jobs. As an integrated oil and gas company, we are best-placed in the area to do this.”

Selection of the site for the cracker and derivative units would be determined in the next phase of this project. Building the facility would be subject to receiving all applicable permits.

Other notes:

  • A cracker breaks down large molecules from oil and natural gas into smaller ones. An ethylene cracker produces base petrochemical “building blocks” which are the first stage in the chemicals manufacturing chain.
  • Derivatives are the chemicals that are made during subsequent processing stages, using products from the cracker. Polyethylene is a derivative of ethylene.
  • Shell owns and operates four petrochemical crackers in the US at Deer Park, Texas and Norco, Louisiana.
  • Natural gas companies have to remove Natural Gas Liquids (NGLs) from methane to make it “pipeline quality.” NGLs are made up of ethane, propane, butane and other compounds. These can be used as feedstock to produce chemicals. Propane and butane are types of Liquefied Petroleum Gas (LPG) and can also be used as fuels.
  • Ethylene is a very important base chemical in the chemical and plastics industries. Ethane is a feedstock for ethylene.

*Shell Press Release (Jun 6, 2011) – Shell Plans World-Scale Chemical Plant In USA