Cracker Construction Moves Ahead at Fast Pace

MONACA, Pa. — Royal Dutch Shell has demonstrated that much can be accomplished in three months.

Since the company announced June 7 its intention to proceed with what is now an estimated $6 billion-plus ethane cracker plant along the Ohio River near Monaca, Pa., the site has undergone dramatic changes.

New buildings are constructed or under construction, roads that just weeks ago hugged the site are now completely re-routed and repaved, and an area east of the proposed plant is no longer a brush-filled hillside but a flat, cleared, and dusty brown pallet ready to accommodate development that many say will set a new course for the regional economy.

“To say that this is a significant project is an understatement,” says Dennis Yablonsky, CEO of the Allegheny Conference on Community Development.

The most recent development at the cracker site is a new parking garage that will be used to accommodate construction workers as the plant goes up, and then to serve those working full-time at the facility once it’s operational, says Jim Gallik, training director for Ironworkers Local 3.

“It’s going to be a boon for skilled labor,” Gallik says. “We’ve been on a downturn for the past three or four years and this is a great opportunity for us to rebound and put everybody to work.”

On the afternoon of Sept. 22, hundreds of workers were busy preparing land and operating heavy equipment at the 340-acre site, now protected by a security fence and a rerouted road that swings further around the work area.

Earlier that day, Gallik and Yablonsky joined a panel discussion related to opportunities in the region’s petrochemicals market and the cracker plant at Shale Insight’s energy conference in Pittsburgh. The Marcellus Shale Coalition, the Ohio Oil and Gas Association, and the West Virginia Oil and Natural Gas Association sponsored the conference, held at the David L. Lawrence Convention Center.

Also on the panel were Andrew Bell, supply manager for Ineos America LLC; Dennis Davin, secretary of the Pennsylvania Department of Community and Economic Development; and Jerry James, president of Artex Oil Co. and director of Shale Crescent USA.

Critical to developing an energy cluster for the region is improving Pennsylvania’s pipeline infrastructure so ethane gas from wells can be transported to processing plants such as Shell’s project, says Davin. “There are about 9,000 unconventional wells in Pennsylvania,” he says. “Part of our job is to do everything we can do to get that gas to market.”

These opportunities include hubs such as Marcus Hook near Philadelphia, which serves as an export distribution center for natural gas..

Companies such as Ineos, based in Zurich, would transport liquefied shale gas to markets in Scotland, where fracking is banned, says Andy Bell, supply manager for Ineos America. “We’re the largest petrochemicals company in the world,” he says, and is now transporting liquid ethane out of Marcus Hook and into Britain.

Davin praised efforts by Consol Energy and the Pittsburgh International Airport and their lease agreement that allows Consol to drill on airport land. In turn, the airport receives sufficient revenues from lease bonuses and royalties to help reduce its operating costs. Add ethane processing into the mix, and Shell’s project “is an absolute game changer” for the regional and state economy, Davin says.

While incentives helped attract Shell to the region, the real draw is the amount of natural gas in both the Utica and Marcellus shale plays, says Jerry James, president of Artex Oil, and the director of Shale Crescent USA, a group that is promoting southeastern Ohio as one of the most prolific natural-gas producing regions in the world.

“The United States is now the leading natural producer in the world,” he says. “All of that growth in natural gas is coming from the Marcellus and Utica. We’ve not seen this in well over 100 years.”

Feedstock to supply Shell’s ethane cracker comes from the estimated hundreds of trillions of cubic feet of natural gas trapped in the Marcellus shale – a geologic formation that stretches from the north central part of Pennsylvania and into the southwestern sector of the state – and the Utica shale, which encompasses much of eastern Ohio. Geologists have estimated the Marcellus contains between 500 trillion and 800 trillion cubic feet of gas, and it’s estimated the Utica holds more than 700 trillion cubic feet.

This abundance of natural gas led to the lowest commodity prices in the industrialized world, which is a large draw for energy-intensive manufacturers, James says. Another asset is the Ohio River, which provides a direct shipping lane to the Gulf of Mexico. And, the region has a skilled workforce that can perform the work necessary to advance the industry. “We have one mission,” he says of Shale Crescent USA, “and that mission is to tell the world about the world-class opportunities here.”

Construction work on the Monaca plant itself isn’t scheduled to begin until next year, and it will take about three years before the cracker is operational. A cracker plant converts ethane gas into polyethylene, a base ingredient used in most plastics and countless consumer products.

The Ironworkers’ Gallik says his membership and the skilled trades would not only see benefits from the plant’s actual construction, but also “all of the industry that’s going to be coming for decades – all the ancillary projects. It’s going to be a great way for a young man or a young woman to get a family-sustaining career and get a good start in life.”

Gallik says training programs across the trades spend roughly $30 million a year in western Pennsylvania to develop the skills of new ironworkers in the Marcellus region.

Add the Utica region to this, and that number climbs to about $100 million. “This is a great opportunity to bring in new people, because the amount of construction jobs is going to be immense,” he says.

That means other trades in Ohio and West Virginia will be needed to man the site as full-scale construction takes hold. “We’ll be drawing workers from Ohio and West Virginia,” Gallik says.

Drilling activity in both shale plays is substantially reduced since oil and gas prices collapsed during the fall of 2014. However, there are signs that the market is slowly picking up.

On average, 2,000 construction workers and tradesmen will be on-site, while the number of workers will peak at about 5,000, says the Allegheny Conference’s Yablonsky. According to the American Chemistry Council, Shell is expected to invest in excess of $6 billion in the plant, hire 600 permanent employees, and produce more than three billion pounds of polyethylene from the operation, he says.

Moreover, Yablonsky says more than 3,000 people will be required to supply the cracker once it’s fully operational, he notes. “I’m getting calls every day,” he says of potential suppliers to the project. “I’m sure Shell is getting more, and my understanding is that they’re going to use as many goods and services from a 100-mile radius as they possibly can.”

This is well within the range of businesses or locations across the border in the Mahoning Valley, Yablonsky says. The Mahoning County line, for example, is just 40 miles away, while Columbiana County communities such as East Palestine are less than 15 miles away from the site. The impact of the project should also stretch into southwestern Pennsylvania and West Virginia. “All three states will be impacted, which is wonderful.”

Yablonsky says the project is attracting attention from international plastics interests that are now considering this market, and he’s hopeful that another cracker plant in Belmont County, Ohio, under review by PTT Global, will move forward.

Ultimately, the Monaca plant alone is anticipated to have a $4 billion annual economic impact to the tri-state region, Yablonsky says. “Seventy-two percent of customers are within 700 miles of this facility,” he says.

Pictured: Royal Dutch Shell is building a $6 billion ethane cracker plant at this site in Beaver County, Pa.

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