Shell’s van’t Hoff sees a revitalisation in the US northeast
A major highlight at the American Chemistry Council (ACC) Annual Meeting was Shell’s announcement that it made a final investment decision (FID) to build a world-scale integrated polyethylene (PE) complex in Pennsylvania. The announcement, which surprised the many doubters on this project, underlined the continuing US shale gas advantage.
Yet projects are not without challenges, evidenced by BASF’s decision to postpone the FID on its methane-to-propylene complex in Texas and Sasol’s cost overruns and delays at its Louisiana cracker project.
Anglo Dutch energy and chemicals producer Shell’s project will be in the second wave of US crackers based on shale gas feedstock as it will start up beyond 2020. It also marks a sharper pivot towards chemicals.
The chemical sector, including PE, will be a growth priority for Shell, said the head of its chemical business. “We are pleased with the performance of the chemicals business in the last five years, generating around 15% return on capital,” said Graham van’t Hoff, executive vice president at Shell Chemicals, who spoke at a press conference at the ACC Annual Meeting.
“Philosophically, to get rewarded, you need competitive advantage which comes from feedstocks as well as a first class footprint in terms of scale.”
Shell’s new cracker in Pennsylvania will use what it calls the cheapest gas in North America coming from the Marcellus shale. Construction on the 1.5m tonne/year ethane cracker, along with three PE units totalling 1.6m tonnes/year of capacity in Monaca, Pennsylvania, is slated to start in 18 months, with start-up targeted in the early 2020s
“It was a strategic objective of Shell’s for several years to re-enter the PE business somewhere in the world but with a particular emphasis on North America. PE is around 65% of global ethylene consumption and we could not see ourselves continuing to grow ethylene without PE,” said van’t Hoff.
Dubbed “Project Franklin”, Shell’s cracker will be the first built in the Northeast US.
Such a massive complex will spur additional investment in the region in downstream and related businesses, bringing revitalisation to a region hard hit by the decline of coal.
Clearly the opportunities are still there to harness the advantage of US shale gas, but major projects are likely to take longer to plan, and to build.