The US petrochemical industry is enthusiastic about the bounty of domestic shale gas, but not all ethane-fed crackers, fed by natural gas liquids, now on the drawing board will end up being built, executives said Wednesday.
Ethane-fed crackers convert ethane, the most abundant of natural gas liquids, into ethylene.
And of those crackers that might be built, development may "certainly not" be completed in expected time frames, Ben van Beurden, executive vice president of Shell Chemicals, told attendees at the IHS Chemical world petrochemicals conference in Houston. That includes the project Shell is evaluating at a site in Western Pennsylvania, about 27 miles northwest of Pittsburgh.
"We are still at the stage of assessing this" in terms of commercial viability, he said.
Still, the location is promising because of its proximity to both feedstocks and downstream markets, Van Beurden said.
Earlier this month, Shell said it signed a land option agreement for the site, which would include an ethane cracker and possibly polyethylene and mono-ethylene glycol units, with the PE and MEG targeted at industrial demand in the US Northeast. Asked by an IHS moderator when an investment decision could be reached, he declined to forecast, but he maintained this project has "intrinsic advantages."
Jim Gallogly, the CEO of LyondellBasell, agreed during a panel discussion that a US cracker overbuild in not in the offing.
'BIGGEST BOOM OR BIGGEST BUST'
There are 17 billion-22 billion pounds of new capacity that has been announced, but "this is unlikely to happen anytime soon," Gallogly said, adding that permitting is going to be difficult and delays can be expected.
The first to gain permits will be the winners and debottlenecking projects would get to market sooner, he added. There may be so-called condo crackers built by multiple partners. Also, projects could be built aimed at derivatives markets and he expects such joint projects to be announced in the next year or so.
Gallogly, a former ConocoPhillips upstream executive, stressed the importance of gaining an advantage from the near-term gas supply picture, saying that LyondellBasell would expand cracking capacity at its existing La Porte and Channelview, Texas, plants and it would participate in a condo cracker. Deploying such assets at brownfield sites in the near future "is going to capture value early," he said.
Still, he did not rule out a new ethane cracking facility for LyondellBasell at some later point. "That doesn't mean we won't add later if ethane continues to grow," Gallogly said.
Another speaker, Jim Fitterling, an executive vice president at Dow Chemicals, focused on an underlying, threshold question for growth in US petrochemicals. He questioned how sustainable is the trend for reliable, economical gas supply.
The US is "on the precipice of either the biggest boom or the biggest bust," said Fitterling, pointing to competing demand markets for the gas. He urged others in the petchems sector to oppose government policies that "artificially" create more demand from other sectors.
"We know that gas will replace some coal in power plants," Fitterling said. "It won't replace all the coal. It's not a silver bullet solution. The only realistic solution for the energy future is an all-of-the-above policy" for energy supply resources and that development should stem from market forces not government policy enforcement, he added.
Fitterling also argued against LNG exports, saying it is better to export gas "in solid form," such as manufactured products and commodities.
