Coal out, ethylene in: how the map of the US Northeast is changing

The map of the tri-state area where Pennsylvania, Ohio, and West Virginia meet is changing, and not only from blue to a strong shade of red.

Shell's ethane cracker in Pennsylvania promises benefits to Ohio and West Virginia too (Image credit: Shell)

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Where coal is in dramatic decline, a petrochemicals industry based around a number of planned ethane crackers is emerging to pick up some of the slack.

Shell became the first company to approve a major petrochemical complex in the region in June, when it announced it would begin construction of an ethylene cracker with a polyethylene derivatives unit in Potter Township, Beaver County, about 30 miles north-west of Pittsburgh, by the fourth quarter of 2017. The complex will use ethane from shale gas producers in the Marcellus and Utica basins to produce 1.6 million tons of polyethylene per year. Site preparation has begun, and start-up is scheduled for 2022.

Two additional crackers are in the pipeline: Thailand’s PTT Global and Japan’s Marubeni are expected to make a decision on a 1 mtpa cracker in Dilles Bottom, Ohio, across the Ohio River from Moundsville, West Virginia, by Q1 2017. Braskem has been planning a 1.1 mtpa cracker in Parkersburg, W. Va., although multiple sources have confirmed to Petrochemical Update that these plans are on hold due to the legal troubles of Brazilian parent company Odebrecht.

All three crackers would be located along a 150-mile stretch of the Ohio River. Some 70% of North American polyethylene consumers live within 700 miles of this region, Keith Burdette, West Virginia Secretary of Commerce, commented at Petrochemical Update’s Northeast US & Canada Petrochemical Construction Conference earlier this year.

Although the Braskem project slated for his state has since been put on hold, Burdette said at the time that the competition between the three states to attract an ethane cracker is “pretty much over”. He explained, “We’re not trying to build a facility anymore. We’re trying to build an industry. And building an industry is a lot more complicated.”

The Greater Pittsburgh area includes counties in Pennsylvania, Ohio, West Virginia, and even Maryland (Image credit: Pittsburgh Regional Alliance)

Dennis Davin, Pennsylvania Secretary of Community and Economic Development, who sat alongside Burdette on the panel, noted that all three states would contribute to the 6,000-strong workforce needed for the Shell project at peak construction, and to the 600 full-time jobs. “We know there are going to be plastics manufacturers, maybe fertilizer manufacturers, and a variety of other types of manufacturers and downstream companies that are going to look for sites that are in south-west Pennsylvania, in Ohio, and West Virginia,” he added.

Making room for everyone

A “tremendous” amount of planning is underway for the facilities that will spring up around the Shell cracker, Charlie Schliebs, corporate secretary of the Pittsburgh Energy Innovation Center (EIC), and managing director of Stone Pier Capital Advisors, told Petrochemical Update this week.

Linde is rumoured to be close to signing a long-term contract to supply nitrogen and hydrogen to Shell. Schliebs said other potential suppliers and service providers to the cracker were also engaged in planning. Plastics-manufacturing facilities will follow in a few years, he said, pointing out they will only be built once Shell begins producing pellets at least five years from now.

According to an economic impact study prepared in December 2014 by the Robert Morris University School of Business and focusing only on Pennsylvania, the Shell cracker should generate 5,367 to 6,776 direct and indirect jobs statewide, and deliver total labor income of about $8.9 billion to $11.4 billion over a 40-year operations period. Total Pennsylvania value added from ongoing operations to land at between $17.3 billion and $22 billion, the study concluded.

The Northeast's petrochemicals industry is developing in an area with plentiful natural-gas resources (Image credit: Marcellus Shale Coalition)

The EIC and the Pittsburgh Regional Alliance (PRA) are two of the organizations that have been heavily involved in preparations in the tri-state area. Patty Horvatich, PRA Vice President Business Investment, suggested to Petrochemical Update that as market opportunities mature, services firms associated with the industry may even build regional officer or headquarters in the area.

The PRA is behind the Power of 32 Site Development, a $49 million fund helping to close infrastructure financing gaps and concentrating its investments on eligible sites in the 32-county Greater Pittsburgh economic region, covering southwest Pennsylvania, southeast Ohio, and northwest West Virginia. Horvatich revealed that studies are underway to identify these gaps, and this includes learning how to transform former coal-fired power plants into assets serving the burgeoning petrochemicals industry. Together with the Pennsylvania state government, studies are also underway to identify whether other plants could be built in the area to receive feedstock not only from ethane but from other natural gas liquids, propane and butane.

The Appalachian Basin has traditionally been expoited for its coal (Image credit: US Geological Service)

On the subject of former coal-fired plants, Horvatich noted that many of them are either closing or have been mothballed. Coal plants are “plentiful” in the region, are always on a river, have terrific infrastructure in regard to power and rail, “and are usually in areas where the community welcomes them,” she said. In contrast to the Gulf Coast, where the flat topography makes it easier to secure suitable land for large plants, in the tri-state area it is difficult to find 200 hundred acres of flat land and there is a need for “more ready-to-go sites,” she explained.

Building a workforce

A major challenge of building a petrochemicals industry so far away from the industry’s traditional American heartland on the Gulf Coast is to ensure there are enough trained professionals to do the job. Sam Lyon, Global Workforce Services Manager at Bechtel, the engineering, procurement, and construction contractor for the Shell cracker, has estimated that 10,000-15,000 craft-labor jobs will be needed in the tri-state area in the next five to six years.

Speaking at the Petrochemical Update conference, Lyon argued that the workforce would draw in people from around the United States. At a major Bechtel project in Illinois, conducted for a different industry “by the time we were done, we had employees come from most states in the Lower 48,” he said.

Likewise, according to Schliebs, when BP constructed a refinery in Indiana a few years ago, they had to bring in construction workers from at least a 500-mile radius – many of them from Pittsburgh.

All the trade unions in the region are focused on making sure there are as many construction workers from the region as possible, but “you just don’t snap you fingers and come up with trained union construction people,” Schliebs said. He believes that once the Shell cracker has been constructed, there will be an emphasis on bringing in trained professionals from community colleges such as the one in Beaver County and in neighboring Allegheny County (where Pittsburgh is based).

However, there is also a recognition in the region that experienced personnel will need to be brought in from the Gulf Coast and even from abroad in order to lead and run those facilities at the beginning, and “Shell in particular is a company that can and will and does do that on a regular basis,” Schliebs said.

He explained, “Shell understands that they’re not just trying to build a workforce for Shell. There needs to be a workforce for the entire, broader industry here, because that will benefit everyone. And the more enlightened companies, like Shell, have a focus on that.”

By Nadav Shemer