London, 7 June (Argus) — Shell said it will prioritise chemicals in its growth strategy for 2020 and beyond, including pushing ahead with a new 1.5mn t/yr cracker and polyethylene plant in Pennsylvania.

The main construction work for the multibillion dollar plant is due to start in 18 months. Once on stream — early in the 2020s — the plant will increase Shell's ethylene capacity to some 8mn t/yr from 6.2mn t/yr today. The ethane feedstock will be sourced from shale gas producers in the nearby Marcellus and Utica basins.

Shell began considering an ethane cracker in the Marcellus region five years ago as the boom in natural gas production from shale began to take off. Most chemical producers have been reluctant to venture into the region because of its distance from pipelines, salt storage caverns and other infrastructure found on the US Gulf coast. But Thai petrochemical manufacturer PTT Global Chemical and Japanese trading firm Marubeni say they continue to consider building a cracker in the region but have not announced a final investment decision.

Shell chief executive Ben van Beurden said the company is focusing on "intrinsically, fundamentally advantaged" projects as part of its strategy, describing petrochemicals projects with "low cost with no-alternative-value feedstock." as advantaged.

Pennsylvania has large ethane reserves that could be piped to the US Gulf, Van Beurden said, where most of the US petrochemical industry is based, but that this alternative would result in "a pretty poor netback" compared to keeping the gas in the northeast of the country. Approximately 160,000-180,000 b/d of ethane is rejected in the Marcellus region, while it can cost about 20¢/USG to ship it to the US Gulf coast.

At the same time, the bulk of the polyethylene demand in the US is in the northeast, justifying the construction of a cracker and polyethylene plant for the domestic market rather than sending material to the US Gulf for exports.

Shell has been in discussions with the Pennsylvania government to ensure the project receives "advantageous treatment" but did not provide further details.

The plant will be located about 30 miles north of Pittsburgh along a stretch of the Ohio river that was previously home to a zinc smelter. It is expected to create about 6,000 construction jobs and 600 permanent jobs while creating a hub for related petrochemical businesses.

Shell's announcement comes a day after German chemicals group BASF delayed a final investment decision on a proposed methanol-to-propylene plant in Freeport, Texas, citing "current volatility of raw material prices and the prevailing economic environment," despite widespread production of ethane from the shale in Texas.

Chevron Phillips Chemical, ExxonMobil Chemical, Dow Chemical, Sasol and Formosa are set to add new US ethylene production in 2017-2018 on the US Gulf coast.

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