Drilling Down

Potential Grows for Underground Ethane Storage Hub

SOUTH CHARLESTON, W. Va. – Plans to develop an underground natural gas liquids storage complex for Appalachia — deemed essential for a sustainable chemicals industry in the region — have overcome the first obstacle.

Appalachia Development Group LLC has been invited to submit a Part II application for a $1.9 billion loan guarantee under a program administered from the U.S. Department of Energy, the company announced this week.

The money would be used to support the development of infrastructure for the proposed Appalachia Storage & Trading Hub, an underground ethane storage facility that would be used to store natural gas liquids derived from formations such as the Utica shale in Ohio and the Marcellus shale in Pennsylvania and West Virginia.

“We are pleased to achieve this major milestone, but we are far from satisfied in our pursuit of a vibrant and growing Appalachia based in sound business principles,” said Steve Hedrick, CEO of Appalachia Development Group. “There is much work to be done to drive this forward, and our team is strong, prepared and highly motivated to move forward.”

Appalachia Development Group said it is working to secure another $1.4 billion in financing for the project.

Industry specialists say an underground ethane storage hub is necessary to support an emerging petrochemicals industry across the region — evidenced by Royal Dutch Shell’s $6 billion investment in its ethane cracker plant under construction near Monaca, Pa along the Ohio River.

PTT Global Chemicals, a Thailand-based petrochemicals company, is considering whether to move ahead with plans to construct a similar-size cracker plant on the Ohio River in Belmont County, Ohio. The company has said it would make a final investment decision early this year.

An underground ethane storage hub is vital to building a large-scale petrochemical presence in Appalachia, since cracker plants use ethane and convert the liquid gas into polyethylene pellets, which is used in countless plastics products. According to the American Chemistry Council, development of the storage hub would lead to an estimated $36 billion in new investment from the petrochemicals industry and the creation of 100,000 long-term jobs.

The location of the hub has not been identified.

U.S. Sen. Joe Manchin, D-W. Va., said a storage hub would help attract new investment throughout the region. “This storage hub will create jobs and develop our economy by attracting significant manufacturing and related investment to West Virginia and our neighboring states,” he said.

A new storage hub would also have ramifications across the country, added U.S. Rep. David McKinley, R-W. Va.

“This project will not only transform the region, it will impact the entire country by enhancing America’s energy dominance,” McKinley said. “The storage hub has the potential to create thousands of jobs, attract billions in investment, invigorate Appalachia’s economy, and establish our area as a force in the petrochemical industry.”

SOURCE: Appalachia Development Group LLC.

Published by The Business Journal, Youngstown, Ohio.