Covid cases at Shell, Daelim backing out in Ohio slow Northeast chemical hub development

Only about 3,700 construction workers were at Shell’s site as of mid-July down from 8,000 in early March, and the timeline to add more workers looked uncertain. As for PTTGC, the Thai company will face very different market conditions compared to those that attracted Daelim two years ago.

Image shows Shell's Monaca plant under construction as of June 2020. Photo Courtesy of M.M.

Work to build a U.S. Northeast petrochemical hub slowed in July as Covid-19 hindered a gradual return to full workforce at Shell’s polymer project in Pennsylvania. Meantime, South Korea’s Daelim Industrial’s backing out from a similar project in Ohio left Thailand’s PTTGC in need of a new partner.

Shell’s Business Integration Lead Michael Marr said during a Reuters Events July 16-17 conference that because 17 workers tested positive, the company decided to pause efforts to add workers. Weekly evaluations will tell whether and when to add more, he said in a video recorded July 15. 

On a positive development for plans to build a new hub in the Northeast, Pennsylvania looked nearly set to offer nearly $670 million in incentives over a 25-year period to chemical and fertilizer projects that would use dry natural gas.

Ramping up of workers amid controls  

Shell started building in 2017 an ethane cracker and 1.6-million-tonnes polyethylene capacity after site preparation started in 2013.

The project includes a 250-MW power plant and a 97-mile-long pipeline connecting a Monaca, West Pennsylvania site to three ethane source points in Ohio, Pennsylvania and West Virginia.

“We had been at peak in mid-March. On March 18, at the end of the day shift, we announced that the 8,000 or so workers on site were being furloughed until we could develop exposure control,” Marr said.

During March 18-20 “we ramped the site down and, after that point, for the next several weeks we had a total of 300 workers on site,” Marr said.

“We kept it at that level from the middle of March to mid-April at which point we added 200 new workers into the mix, and the (…) 500 enabled us to position the site (to add) additional workers on a weekly basis,” he said.

“Throughout May and June we had about 350 workers a week typically (…) that brought us up to where we are currently which is about the range of 3,500 to 3,700 workers on the site per day and we stayed there since June 30,” he said.

Mitigation efforts include using flex-glass dividers in lunch tables to accommodate two workers each. Half of the seats in buses taking workers to the site are left unused. There is also disinfecting and temperature checks.

17 new cases despite precautions forced pause

“As of July 14 we had a total of 17 cases on site,” Marr said.

“We believe that is reflective not of additional risks that are occurring at the site but people being in the community,” he said.

“We believe we have a good exposure-control plan on site we implemented and at the same time in the last three weeks, as we seen the number of cases grow, we decided to at least temporarily call the addition of more workers,” he added.

“Whether or not we add workers next week, I cannot speculate as of July 15. But we will do so when we are comfortable that we have sufficient levels of mitigation,” he added.

Weekly meetings are held every Thursday to evaluate and decide, he said.

Bechtel is Shell’s contractor in the project to build a 1.5-million-tonnes annual capacity of ethylene and three polyethylene units.

Shell’s estimated investment is over $6 billion, according to industry estimates. Shell has said it expects operations to start early in the 2020s .

Daelim bails out

The changes for a similar ethylene-polyethylene project in Ohio took a new hit in July. Conditions for the project had already deteriorated in previous months.

Daelim “has taken the difficult but necessary decision to withdraw as equity partner in the project,” Daelim and PTTGCA said in a joint statement on July 14.

Daelim joined the project two years ago while PTTGCA has been involved for several years, postponing a final investment decision at different points.

“We are in the process of seeking a new partner whilst working toward a final investment decision. We look forward to making an announcement by the end of this year or early next year,” PTTGCA said.

Daelim is a South Korean conglomerate that includes over 17 subsidiary companies including petrochemicals and one of Asia’s biggest construction companies.

“While the news is a bump in the road we remain committed to that project,” said Matt Cibulsky, managing director at JobsOhio, during the July Reuters Events conference. JobsOhio in a non-profit organization that promotes job creation.

“We’ve been involved with the PTT project from the beginning and it will be seven years later this month,” he said during the conference.

“Jobs Ohio is a private entity with their own funding so we spent approximately $70 million to prepare this site in partnership with PTTGCA,” he added. The project has an air permit and remains attractive considering its location near feedstock and markets, he said.

New tax incentives

Denise Brinley, director of the Pennsylvania Office of Energy, said on July 16 the State may approve new incentives but declined to confirm press reports that the governor will sign House Bill 732.

“There is a provision of (…)a tax credit to companies that purchase dry natural gas from the commonwealth to produce petrochemicals or fertilizers,“ she said.

Development in the region for more storage and regional pricing benchmarks would help future projects, she said.

Covid-19 may end up boosting the region’s possibilities to attract a plastics and chemical hub, Brinley added.

It has “turned the spotlight on the global supply chain” and the shortfall of domestic production of N95 respirators and protective equipment, mostly imported from Asia.

The region offers robotics, universities in addition to plentiful natural resources, she added.

By Renzo Pipoli