Paper: Northeast could be second U.S. petrochemical hub

By Staff | January 09, 2018

An abundance of gas from the Marcellus and Utica shale formations in the northeastern U.S. offers great potential for jobs and economic development, but infrastructure, community support and a well-trained workforce are necessary to capitalize on the opportunity.

That’s the conclusion of the U.S. Northeast Petrochemical Industry Market Outlook 2018, a new white paper from Petrochemical Update. The publication provides a near-term market overview for petrochemical industry in the northeast U.S. It also includes an update of current and proposed projects, a perspective on regional challenges to petrochemical sector expansion, an update on the Appalachian natural gas liquids storage hub and a construction cost analysis.

“While the region with its ample and reliable supply of ethane is primed for the emergence as a second major petrochemical manufacturing hub in the United States, it faces the challenges of rapidly developing a workforce, as well as storage and pipeline infrastructure to fuel such development,” the report says.

The paper notes that discoveries of natural gas in the Marcellus and Utica shale extending from New York through Pennsylvania, Ohio and West Virginia prompted announcements of three new ethane cracking plats in the area. However, the Shell Appalachia LLC petrochemical complex in Beaver County, Pennsylvania, is the only one on track to be constructed. It will be the first major U.S. project of its type to be built outside the Gulf Coast in 20 years.

The paper cites Energy Information Administration (EIA) data showing that the demand for natural gas is growing along the U.S. Gulf Coast by about 20 percent year because of the commissioning of LNG export facilities, stronger industrial demand and the increases in pipeline exports to Mexico.

According to the paper, “This demand is also being met by recent shale gas activity in the West Texas Permian Basin, Woodford Basin and Eagle Ford Basin, all of which have good connectivity to the Gulf Coast ethylene cracker market.”

EIA data shows that in the northeast region, natural gas production of 20 billion cubic feet (bcf) per day in 2017 should double in the next 35 years, accounting for 40 percent of total U.S. natural gas production. Dry natural gas production in the eastern region of the U.S.is forecast to grow by a third between 2015 and 2025.

The U.S. produces 25 percent of all the world’s NGL and more than 25 percent comes from the northeast, according to the American Chemical Council (ACC). From 2026 to 2030, NGL production for U.S. demand alone is expected to reach nearly 6.3 million barrels per day (bpd). More than 1 million bpd of NGL will be sourced from the Marcellus and Utica Shale plays.

Unique to the region is that up to 40 percent of the natural gas produced from the Marcellus and Utica shale play is rich in NGL. More than 70 percent of it is ethane and propane.

However, the paper notes that while the northeast region is exporting its ethane to Canada, the Gulf Coast and Europe, “lack of pipelines restricts what is sold, and the balance of at least 150,000 b/d is downgraded in value as it is mixed with the natural gas that supplies homes and businesses for heating and cooking.”

The Petrochemical Update white paper says that a second petrochemical hub in the U.S.—in addition to the one on the Gulf Coast—could “provide supply-chain redundancy for the nation which now relies primarily on production from a region susceptible to hurricanes and tornados.”

Even when pipeline shipments of ethane out of the northeast region are factored in, up to 350,000 to 400,000 bpd of ethane is available for petrochemical feedstock within New York, Pennsylvania, Ohio and West Virginia—enough for five or six ethane crackers, the paper says.