Shell Oil Co. is poised to unveil the site of a future USD 2 billion petrochemical production unit, a project that marks the natural gas-driven resurgence of the U.S. chemical industry and has several Rust Belt states interested.
Shell intends to build a giant ethylene cracker which will convert the ethane found in natural gas into ethylene, a core component for plastics and fertilizer. The ethylene cracker will be built near the natural-gas rich Marcellus Shale formation, which underlies a good portion of the U.S. Northeast. The final location will be announced by the end of the first quarter.
Upon completion, Shell’s would be the first ethylene cracker built in the country since 2000, illustrating the revival of the U.S. petrochemical industry. Hydraulic fracturing has made NGLs abundant and lower in cost; prices for ethane, the most common natural gas liquid, were 53 cents a gallon on Feb. 24, a third of the high they hit in July 2008, according to Platts. Shell and Dow Chemical (DOW), among other companies are searching for new ways to transform this abundance into revenue.
“It makes good economic sense for gas producers and customers in the Marcellus to have a cracker in the region,” Shell spokeswoman Kelly op de Weegh.
Shell expects 10,000 construction jobs will result at the peak of building the cracker, a massive block of interconnected steel pipes, and hundreds of permanent jobs and millions in tax revenue will be created during its operation. Ohio, West Virginia and Pennsylvania–areas hit hard by the economic downturn and the decline in low-skill manufacturing jobs–are all in heated competition to host the project, which was announced in June 2011.
Shell expects the cracker to be running in 2017.
In the past month, West Virginia and Pennsylvania both passed laws offering tax incentives for major construction projects. The West Virginia law, passed on 25 January 2011, caps property taxes at 5% for 25 years for any ethylene cracker costing USD 2 billion or more built in the state- the same amount Shell estimates its project will cost.
