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Shell’s Major Shift to Natural Gas, US Gas-to-Liquids Plant?

Shell is moving into natural gas in a major way. In fact, natural gas will eclipse crude oil for Shell sometime next year by being more than 50 percent of Shell’s global production. Shell has committed to spending $2 billion to build an ethane cracker plant in the Marcellus region of the U.S., and now they are talking about building a gas-to-liquids plant. Shell invested an astonishing $19 billion in a gas-to-liquids plant in Qatar. Imagine that investment coming to the U.S.! Such is the transformative power of shale gas.

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Shell, One Other Company Close to Cracker Plant Announcement

According to officials in West Virginia, who are super-serious about attracting at least one ethane cracker plant to their state, Shell and one other company will announce site selections for their plants in January of 2012. West Virginia fully intends that at least one of those two plants will be inside their borders, and they are pulling out all of the stops to ensure it happens. In fact, according to WV Gov. Earl Ray Tomblin’s chief of staff, it’s the newly-elected governor’s “No. 1 goal.”

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Shell Nears Decision on Where to Build $2B Cracker Plant

ShellShell Oil is “nearing a decision” on where to build a multi-billion dollar ethylene cracker plant in the Marcellus region, and states in that region—specifically Pennsylvania, West Virginia and Ohio—are aggressively competing to have the plant built in their state. (See MDN’s petrochemical primer for details on how shale gas drilling relates to the chemical industry).

The stakes are high indeed. The cost to build the plant will exceed $2 billion, and it’s estimated the plant will attract some $16 billion in associated industry expenditures and provide more than 17,000 jobs in those associated industries.

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Shell PR Offensive: Full Disclosure of Fracking Chemicals, Groundwater Monitoring, 100 Percent Wastewater Recycling

Royal Dutch Shell, one of the largest energy companies in the world, is going on a public relations offensive with respect to its shale gas operations in the U.S. In a master PR move, Shell used the uber-liberal Aspen (CO) Ideas Festival to unveil its Global Onshore Tight/Shale Oil and Gas Operating Principles. Among the things Shell announced is support for full disclosure of fracking chemicals, monitoring of groundwater and a reduction of the water used in fracking. They also stated they recycle “almost 100%” of fracking wastewater in their operations.

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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).

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Surprise! New York State’s Pension Fund Invests $1 Billion in Shale Gas Drilling Companies

In an interesting (some would say hypocritical) twist on New York State’s moratorium against drilling in the Marcellus Shale because of environmental concerns, it seems the state’s comptroller has no problem investing some of the state’s huge $140 billion pension fund in shale gas drilling operations, to the tune of $1 billion:

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Foreign Investment in America’s Shale Gas: Is it Good or Bad?

One of the main arguments in favor of Marcellus shale gas drilling is that America can become more energy independent—less dependent on the energy (oil and gas) from other countries. It is an argument that strikes a chord with many Americans. The argument also goes that much of the gas produced in the region will stay “local” and cause natural gas prices to remain low for consumers. But what if foreign companies and foreign-backed government entities start buying leaseholds and come here and drill? Will the gas remain here, or will it be exported?

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Some Landowners in Tioga, PA Area Receive Six-Figure Royalty Checks – Each Month

gas money flameAn article discussing the potential impacts of shale gas drilling in the area around Erie, PA does a good job in exploring the benefits of shale gas drilling that have already occurred in Tioga County, PA. Tioga County is one of the most densely populated drilling regions in the entire Marcellus Shale play. A few facts from the article:
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East Resources Sells to Royal Dutch Shell for $4.7 Billion, Deal Includes All of East’s Marcellus Shale Operations

East Resources, a major drilling company in the Marcellus Shale, especially in Pennsylvania, is selling itself to Royal Dutch Shell for a whopping $4.7 billion. From drilling a single horizontal Marcellus Shale gas well in 2009, East has drilled some 75 horizontal wells in the past 12 months. East did have plans to drill 6,000-7,000 wells in Tioga County, PA over the next “several years” (see this MDN story). No word on the planned drilling for Tioga County and other regions, but MDN assume Shell did not invest in East to not drill. In fact, the pace of drilling may well pick up with Shell’s investment.

From the East Resources press release:

East Resources, Inc., a Pennsylvania-based independent oil and gas producer and one of the most active explorers in the Marcellus Shale, along with its private equity investor Kohlberg Kravis Roberts & Company, signed a definitive agreement to sell the company’s principal subsidiaries to an affiliate of Royal Dutch Shell plc (“Shell”) for cash consideration of $4.7 billion. The sale includes East’s natural gas and oil exploration and production operations and most of its holdings in related businesses. With the purchase of East Resources, Shell will acquire approximately 650,000 net acres of Marcellus Shale rights in Pennsylvania, West Virginia and New York, and 1.05 million acres in total.

East Resources, founded in 1983 by Terrence M. Pegula, has been one of the Appalachian Basin’s most active exploration and production companies for more than 25 years. Since its inception, East has grown primarily through its exploration successes, several strategic acquisitions, and most recently the development of the Marcellus Shale.

East Resources employs approximately 300 office and field personnel in Pennsylvania, West Virginia, New York and Colorado. Its principal offices are located in Warrendale, PA, Broomfield, CO and Parkersburg, WV. Shell will continue to operate with East’s workforce to ensure continuing success in the growth and development of the reserves it will acquire in the purchase.

The sale of East Resources to Shell is expected to close in two phases. The first phase of the sale will be completed in mid- to late summer. The second phase of the sale, including the sale of the West Virginia business, will close later this year, pending certain regulatory approvals.

“The sale of the company to Shell will ensure that the capital needed to develop East’s significant Marcellus Shale holdings will be available,” says Mr. Pegula, East’s owner and Chief Executive Officer. “Shell’s entry into the region should benefit Pennsylvania, West Virginia and New York through significant new capital investment, new jobs and new business opportunities. I am very proud that this transaction has brought Shell into the Appalachian Basin.”

President of Shell Oil Company, Marvin Odum commented, “East Resources’ management has built an excellent organization which we are pleased to have as we enter the northeast US and specifically the Marcellus Shale play.”*

*East Resources Press Release (May 28) – East Resources Inc announces sales agreement with Royal Dutch Shell plc