Shell rethinking its Pa. cracker plans - WOWK 13 Charleston, Huntington WV News, Weather, Sports

Shell rethinking its Pa. cracker plans

Posted: Updated:

Royal Dutch Shell is rethinking its plans for an ethane cracker in Western Pennsylvania and two other cash-intensive projects, leaving business leaders in the Mountain State to wonder if the spin-off economic growth they've been anticipating is ever going to come.

Shell CEO Peter Voser told analysts the company can't afford to do the cracker in Pennsylvania plus a gas-to-liquids plant in Louisiana and a liquid natural gas plant in Canada. Voser said in the near future, the company will have to decide which of the three signature projects to give the green light.

"We cannot afford to take all three together at once and if we could, I am not sure we have the engineers and the project managers to do so," Voser said during a recent conference call discussing 3Q earnings. "So we will need to make choices (about) which go forward."

Shell announced in March 2012 it had selected an industrial property in Monaca, Pa., for the cracker plant, which would convert ethane from shale deposits to ethylene, a compound used in manufacturing plastics. Monaca is located just minutes from the West Virginia state line.

While they'd hoped to land the cracker in the Northern Panhandle, state and local authorities figured to capitalize on downstream opportunities, particularly in the chemical industry.

"In spite of the fact that they made the wrong location decision, we're supportive of their effort and hope it gets built," Commerce Secretary Keith Burdette said Nov. 12. "There are still companies that are looking at West Virginia, in a much broader sense, for location of a possible cracker. Multiple crackers are (being) looked at."

Burdette concedes because of its proximity, Shell's Pennsylvania cracker would be a boon to the Northern Panhandle economy, creating a host of downstream opportunities, but says it's by no means the only cracker under consideration.

"Do we want it in West Virginia? We absolutely do but at the end of the day, if crackers are built in this region, they'll be built along the Ohio River (and) Kanawha River and affect multiple states," he said. "Sites along the Ohio River are going to have significant impact on West Virginia and Ohio, and sites on the Kanawha will also have significant impact on Ohio and Kentucky. 

"While the competition is keen and we want it in West Virginia, the bottom line is if we can establish the infrastructure in this region it will benefit all of our states."

Pat Ford, executive director of the Business Development Corporation of the Northern Panhandle, said there's no question the group would be disappointed if the Monaca cracker goes on the back burner, "but we're optimistic there will still be opportunities for other crackers to be built in West Virginia."

"Obviously, there's going to be a much more direct benefit on the Northern Panhandle if the one in Monaca is built," he said. "The infrastructure and land are both available to support any spinoff industries associated with the cracker, but as we speak there are opportunities; they do exist for other crackers to be constructed in West Virginia in general and the Northern Panhandle in particular. 

"So either way, I'm confident we're going to see direct economic impact from some type of cracker being built."

And while Shell's Monaca plant is a question mark right now, Ford said it bodes well for the Tri-State economy "that other manufacturers are still looking at Pennsylvania, West Virginia and Ohio for such a facility."

"We're doing everything we can to position ourselves to be considered for a cracker," he added. "It's just a dynamic environment: Pipelines are being installed, wells are being drilled ... if one door closes — and there's no guarantee that it will close in Monaca — I can't help but think another one will open."

Shell, meanwhile, isn't saying which project or projects have the edge.

"We have an embarrassment of riches of high quality opportunities for new LNG, gas-to-liquids and the downstream gas-to-chemicals," Shell CFO Simon Henry told the investment community. "We can't do all of (them). Some of these essential projects are reaching critical planning milestones over the next few months and each project is potentially individually material."