Ohio moves step closer to landing natural gas cracker plant

April 22–One proposal to build an ethane cracker in Appalachia took a step forward this week while another hit a delay as companies mull the economics behind spending billions of dollars to convert shale gas to chemicals.

Ohio Gov. John Kasich announced Wednesday that PTT Global Chemical, Thailand’s largest integrated petrochemical and refining company, along with Marubeni Corp., a Japanese company, picked a spot and will begin a permitting process seen as an early step to building a multibillion-dollar plant in Belmont County, west of Wheeling, W.Va.

“This is a very significant step, but there is still much work to be done,” said Matt Englehart, a spokesman for JobsOhio, an economic development nonprofit.

Cracker plants such as this, and those proposed by Royal Dutch Shell in Beaver County and by a Brazilian partnership in West Virginia, strip ethane from shale gas and convert it to ethylene to make plastics.

Industry leaders and economic development officials have called the plants the next step in capitalizing off the record production of natural gas from the Marcellus and Utica shale. Low global prices and a slowdown in drilling and capital spending among energy companies have some observers wondering when that next step will happen.

Brazilian energy companies Braskem and Odebrecht said they are delaying plans to build in West Virginia, citing the low prices.

“Under the current energy scenarios, the original configuration of Project Ascent needs to be revaluated and a final investment decision on the project will require more diligence,” the companies said.

Shell is mulling construction at the former Horsehead Holdings Corp. zinc smelter in Center as it continues preparing the site and buying land.

PTT and Marubeni will spend the next year to 16 months completing engineering and design plans for the plant. They expect to make a final decision on whether to build in Ohio next year, according to Kasich’s office.

PTT is owned by the Thai government and has seven main business lines. It has the production capacity of chemical and petrochemical products of 8.8 million tons per year. Officials at PTT did not return email requests for comment.

Decisions on whether to build such plants depend more on company finances than the tough energy market, said John Molinaro, president and CEO of the Appalachian Partnership for Economic Growth, based in Nelsonville, Ohio.

“Energy prices and petroleum prices affect the calculations for all of these companies, but they’re not the sole determining factor,” he said. “You really have to evaluate all of these announcements with a deep look into the specifics of the companies making the announcement.”

PTT and Marubeni do not own the site they are considering for the plant, Englehart said. He could not say whether there was an option to purchase the site, or provide figures for how much the plant would cost or how many jobs it would create.

Cracker projects employ between 5,000 and 10,000 people during construction, then several hundred for operations, said Steve Lewandowski, senior director for global olefins at IHS Chemical, an energy research firm.

“It’s really dependent on the project scope,” he said.

Although the plant would process ethane from the Marcellus and Utica, it should not affect the outlook for producers or midstream companies in Western Pennsylvania or Ohio, he said.

“The natural gas will be produced,” he said. “The (natural gas liquid), if it doesn’t go there it will go to export or be shipped down to the Gulf Coast.”

From Bloomberg Business  |  April 22, 2015

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