Drilling Down

Shell Oil Exec: Pa. Cracker is an ‘Excellent’ Project

YOUNGSTOWN, Ohio – A Royal Dutch Shell executive says that a proposed multibillion-dollar ethane cracker plant slated for Monaca, Pa. is an “excellent project” that is at the top of the list of investment decisions the energy giant should make within a year.

“We have had quite a lot of discussion — not yet pulled the trigger on it one way or the other,” Shell’s chief financial officer, Simon Henry, told analysts on a conference call Wednesday. “It is an excellent project,” he said referring to the Pennsylvania cracker. “It’s got a diverse set of market exposures and risks associated with it and therefore provides quite some portfolio resilience relative to the rest of the opportunities.”

Shell has purchased 340 acres along the Ohio River where the former Horeshead Zinc complex once operated. For more than a year, workers have been preparing the site for the potential project.

The company has also leased a 76,000-square-foot building nearby and recently acquired land to be used for pipelines to transport ethane feedstock to the plant.

Henry said that there are “three or four” big projects in Shell’s investment portfolio that need to be addressed. The Pennsylvania project, he added, is “first on the list.”

Investment in these major projects, however, must be considered against an oil and gas market that has collapsed over the last year. Lower-priced oil bit into Shell’s earnings during the first quarter, and Shell’s capital spending has been cut by $30 billion between 2014 and 2016, Henry told analysts.

He implied that a decision on the matter might have been easier were it not for low commodity prices. “If it were not a $40 world (referring to the price of oil per barrel) it would probably be a very easy decision. It’s a very strong and robust project.”

Still, no decision has been made on whether the company will invest in the project and propel it forward, Henry said.

Shell has estimated that the cost of building such a plant would be between $2 billion and $4 billion. In particular, this cracker plant would process ethane liquid gas extracted from the Marcellus and Utica shale plays in Pennsylvania and eastern Ohio.

Cracker plants convert the ethane into polyethylene, which is used as base ingredients in the petrochemical industry.

The project could employ as many as 10,000 workers and tradesmen during the course of the construction phase. Once operational, the plant could employ as many as 500 full time.

Earlier this year, Shell announced that it would step up investment in its downstream business, predominantly in petrochemicals. Although it has cut other large projects from its investment schedule, the Monaca project still remains on the books.

Another company PTT Global Chemical, based in Thailand, is considering building a similar-size cracker across the river in Belmont County, Ohio. A decision on that project has been delayed.

Published by The Business Journal, Youngstown, Ohio.