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Cracking the Ethane Cracker
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Cracking the Ethane Cracker

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R.M. Baker, & D. L. Passmore. (2012, August 16). Cracking the ethane cracker. Invited presentation at the 2012 WIB Symposium, “Innovation through Integration: Re-Inventing the Workforce System,” …

R.M. Baker, & D. L. Passmore. (2012, August 16). Cracking the ethane cracker. Invited presentation at the 2012 WIB Symposium, “Innovation through Integration: Re-Inventing the Workforce System,” sponsored by the Pennsylvania Association of Workforce Investment Boards, State College, Pennsylvania. (see http://pawib2012.tumblr.com)

Shell Chemical LP, a petrochemical unit of Royal Dutch Shell, signed a land purchase option agreement with Horsehead Corporation, a producer of specialty zinc and zinc-based products and a recycler of electric arc furnace dust, to evaluate a site in western Pennsylvania for a potential petrochemical complex. The site is located in Potter and Center Townships in Beaver County near Monaca, Pennsylvania, which is 40 miles northwest of Pittsburgh.

The site currently houses a Horsehead’s plant for zinc products and contains the only electrothermic zinc refining facility in the Western Hemisphere. If the land purchase option is exercised, Horsehead Corporation will vacate the Monaca facility by April 2014.

Shell’s plans for the complex include an ethane cracker that would process ethane feedstock from “wet” Marcellus Shale gas to supply ethylene for a wide variety of intermediate sales to industries and for final end use in manufactured products. “Cracking” involves heating and separating the large hydrocarbon chains found in fossil fuels such as natural gas and petroleum into lighter hydrocarbons such as ethane.

In this workshop, a report by the American Chemical Council (ACC) [Shale Gas and New Petrochemicals Investment: Benefits for the Economy, Jobs, and US Manufacturing] of the potential static U.S. job and tax impacts of ethane production is examined. Then, the results are presented from an analysis prepared by researchers from Penn State’s Institute for Research in Training & Development (IRTD) of the potential dynamic economic and demographic impacts of the Royal Dutch Shell petrochemical complex planned for western Pennsylvania. Special attention is paid to the implications that these impacts estimated by ACC and the IRTD hold for regional workforce development in Pennsylvania.

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  • 1. INSTITUTE FOR RESEARCH IN TRAINING & DEVELOPMENT INSTITUTE FOR RESEARCH IN TRAINING & DEVELOPMENTCRACKING THE ETHANE CRACKER ROSE M. BAKER DAVID L. PASSMORE
  • 2. About these slides… The slides in this collection are the talking points that guided our discussion at the 2012 PA WIB Symposium with approximately 40 Symposium participants. The content and flow of the slides provides an outline of our remarks, but not their detail. Nor do these slides represent the rich, useful comments made by Symposium participants. The possibility of ethane cracker holds much Rose M. Baker promise for western PA. The decision to plan, build, and operate the cracker involves substantial risk and uncertainty by Royal Dutch Shell. PA residents are highly invested in the deliberations about and outcomes from this decision. We welcome any comments or questions you might have about this presentation. David L. Passmore Rose, rmb194@psu.edu, 814.865.9919 David, dlp@psu.edu, 814.863.2583
  • 3. WEB SITE AVAILABLE AT PAWIB2012.TUMBLR.COM …. 2012 WIB SYMPOSIUM PENNSYLVANIA ASSOCIATION OF WORKFORCE INVESTMENT BOARDS Related literature at: August 16, 2012 Penn State Hotel &http://www.diigo.com/user/davidpassmore/psu- Conference Center State College, PA ethane
  • 4. Pennsylvania Ethane Opportunity• Shell Chemical LP land purchase option for Horsehead Corporation near Monaca in Beaver County.• Evaluate site for a potential petrochemical complex.
  • 5. Pennsylvania Ethane Opportunity• Shell Chemical LP land purchase option for Horsehead Corporation near Monaca in Beaver County.• Evaluate site for a potential petrochemical complex.• Process ethane from “wet” Marcellus Shale gas.
  • 6. Pennsylvania Ethane Opportunity• Shell Chemical LP land purchase option for Horsehead Corporation near Monaca in Beaver County.• Evaluate site for a potential petrochemical complex.• Process ethane from “wet” Marcellus Shale gas.• Supply ethylene for intermediate sales to industries & for final end use in manufactured products.
  • 7. Pennsylvania Ethane Opportunity• A $66 million/year tax credit for 25 years totaling $ 1.65 billion.• State pays costs of clean up of the Monaca zinc smelter site for ethane cracker.• Shell free from all state & local taxes if they build at Beaver Co. site.• RBN Energy from Houston says Shell deal at high risk of failure without incentives and subsidies.
  • 8. Shell’s timelineA WORLD–SCALE PETROCHEMICAL COMPLEX IS INTRICATE AND TYPICALLYTAKES FIVE YEARS OR MORE TO BUILD, FROM PLANNING TO START-UP.
  • 9. Shell’s timelineSHELL MUST CLEAR MANY HURDLES BEFORE IT CAN EVEN MAKE ANINVESTMENT DECISION.
  • 10. Natural gas liquids“value chain gauntlet”
  • 11. Shell’s timelineNEED TO CONFIRM THE SUITABILITY OF THE SITE, SECURE ETHANE SUPPLY,COMPLETE ENGINEERING AND DESIGN WORK, CONFIRM THE SUPPORT OFCUSTOMERS FOR PRODUCTS, RECEIVE ALL NECESSARY PERMITS ANDDETERMINE WHETHER THE PROJECT IS ECONOMICALLY SOUND ANDCOMPETITIVE WITH ALTERNATIVE INVESTMENT OPPORTUNITIES.
  • 12. Shell’s timeline
  • 13. Discuss 4 topics today….• Natural gas liquids.• Ethane  ethylene: cracking.• American Chemistry Council (ACC) economic forecasts.• Several quick, back– of–the–envelope forensic analyses.
  • 14. NATURAL GAS LIQUIDS
  • 15. Review of gas well production
  • 16. What comes out of a gas well?• Methane (primarily)• Water• Gases (nitrogen, helium, and some acidic gases such as hydrogen sulfide)• Small amounts of mercury and radon• Heavy gaseous hydrocarbons – Ethane Natural – Propane Gas – Butane Liquids
  • 17. Where’s the “wet” gas?
  • 18. Raw natural gas is processed
  • 19. Methane gas & some gas liquids Methane Ethane CH4 C2H6 Propane Butane C3H8 C4H10
  • 20. Methane gas & some gas liquids Deliver roughly same BTUs & can be mixed Methane Ethane CH4 C2H6 Propane Butane C3H8 C4H10
  • 21. Methane gas & some gas liquids Ethane is said to be “rejected” when mixed with methane Methane Ethane CH4 C2H6 Propane Butane C3H8 C4H10
  • 22. Methane gas & some gas liquids Methane Ethane CH4 C2H6 Deliver much higher BTUs but cannot be mixed with methane Propane Butane C3H8 C4H10
  • 23. Attributes of natural gas liquids(Energy Information Administration)
  • 24. ETHANE  ETHYLENE: CRACKING
  • 25. ETHANE MUST BE “CRACKED” TO MAKE ETHYLENE
  • 26. THE CRACKING PROCESS INVOLVES BREAKING UP THE CARBON AND HYDROGEN MOLECULES AND REARRANGING THEM.
  • 27. CRACKING IS ACCOMPLISHED BY HEATING ETHANE TO GREATER THAN 800°C (1500°F) IN THE CRACKER FURNACE.
  • 28. CRACKING CAN BE ENERGY–INTENSIVE AND ASIGNIFICANT SOURCE OF GREENHOUSE GASES.
  • 29. Ethylene processed in two waysIn Western Europe& Middle East In North America • Ethylene is cracked from • Ethylene is cracked naphtha, a byproduct of from ethane. distillation of crude oil. • Ethylene prices are tied to natural gas prices. • Ethylene prices are tied • Oil to gas price ratio to oil prices. was 30 in late July 2012 and favors gas  ethane  ethylene.
  • 30. Naphtha & oil prices
  • 31. Ethane & natural gas prices
  • 32. A few ethane processing facts• Transporting ethane requires extreme pressure or cold.• No truck, barges, or trains. Ships are not economical.• Pipeline is possible, but transportation costs are high.
  • 33. A few ethane processing facts• 93% of all ethane cracked on Gulf Coast (mostly Louisiana).• No ethane cracked west of Rockies. All ethane is rejected.• Except for ≈ 1 Mb/day, all East Coast ethane is rejected.
  • 34. The gapPennsylvania hasnatural gas… but no ethane processing
  • 35. AMERICAN CHEMISTRY COUNCIL ECONOMIC FORECASTS
  • 36. American Chemical CouncilMarch 2011 national report http://www.americanchemistry.com/ACC-Shale-Report
  • 37. August 2011 Addendum for PA http://goo.gl/1I76J
  • 38. ACC national report examined…• Direct, indirect, & induced effects of – 25% increase in “chemical Industry” output – Capital investment of $16.2 billion• On employment, payroll, total economic output, and tax revenues.
  • 39. ACC national report found…From 25% increase in chemical industry output:
  • 40. ACC national report found…From 25% increase in chemical industry output: (billions)
  • 41. ACC national report found…From $16.2 billion capital investment in plant & equipment:
  • 42. We note, however…• Added chemical industry output in 2006 or 2008 dollars (report does not say), but nearest start is 2017.• Capital investment occurs over 3 years, but ACC compressed this into 1 year.
  • 43. ACC national report…• Found 25% increase in chemistry industry output would generate “17,000 new knowledge-intensive, high-paying jobs in the U.S. chemical industry” (p. 1).• However, did not analyze the industry’s current or anticipated occupational staffing or educational attainment and knowledge/skills/abilities requirements in the industry.
  • 44. ACC forecast for Pennsylvania
  • 45. ACC report for PA found…From $4.8 billion increase in PA chemical industry output:
  • 46. ACC report for PA found…From $4.8 billion increase in PA chemical industry output: (millions)
  • 47. We note, however…• Direct employment effect estimated by ACC is 2,396 jobs.• The Beaver plant is expected to be staffed with 400 workers.• Is it possible that the ACC report overestimates direct employment impact by 600%?
  • 48. We note that, in June…• A member of Governor’s cabinet reduced impact estimate to 6000-8000 jobs.• A cabinet member said that the ACC numbers are used because “because theyre the best available.”• A cabinet member cautioned, “its almost an impossible number to nail down.”
  • 49. We note that, in June,…• A member of Governor’s cabinet reduced impact estimate to 6000-8000 jobs.• A cabinet member said that the ACC numbers are used because A PA Department of “because theyre the best available.” Labor & Industry• A cabinet member study is anticipated cautioned, “its almost an impossible number to clear this up. to nail down.”
  • 50. SEVERAL QUICK, BACK–OF–THE–ENVELOPE FORENSIC ANALYSES
  • 51. Three analyses• If the direct job effect is 400 jobs, not 2,400 jobs.• PA economy when chemical industry output is 25% > than baseline, 2017– 2021.• Chemical industry effects if output is 25% > than baseline, 2017–2021
  • 52. If the direct job effect is 400 jobs,not 2,400 jobs….• 2,924 total jobs – ≈ 400 direct, 1,369 indirect, 1,160 induced• $204 million in payroll – ≈ $58M direct, $95M indirect, $51M induced• $1.32 billion in output – ≈ $0.80B direct, $0.37B indirect, $0.15B induced
  • 53. A word about thenext two analyses… The two findings from analyses ethane is not merely a thought shown on the next two slides exercise. New investments in display our estimates the value petrochemical capacity to in 2017–2021 of a 25% increase utilize this resource advantage in what the ACC report are already being made by described as the “chemical chemical companies. The industry.” The estimates are assumptions are reasonable calculated from the and are consistent with public Pennsylvania REMI Policy announcements by companies Insight, economic and such as Dow Chemical, Shell demographic modeling and Chemical, LyondellBasell and forecasting tool Bayer MaterialScience among (http://remi.com). others.” The report describes the increase as “hypothetical, A 25% increase in an industry but realistic.” the size of the chemistry industry in Pennsylvania is, in a More consideration of the word, huge. Unprecedented. economic modeling of this However, the ACC report change is needed. “considers a 25% increase in
  • 54. PA economy when chemical industryoutput is 25% > than baseline, 2017–2021
  • 55. Chemical industry employment if outputis 25% > than baseline, 2017–2021
  • 56. Ours are analyses,not forecasts• Our quick, back–of–the–envelope analyses are not forecasts. – We leave the forecasting of PA chemistry industry futures to those paid to do it. – Our analysis is more like an fact–seeking autopsy of the Pennsylvania chemistry economy.  We just want to understand the numbers already published.• Royal Dutch Shell is taking on substantial risk and facing many uncertainties in this project, as PA residents are, too.
  • 57. WEB SITE AVAILABLE AT PAWIB2012.TUMBLR.COM …. 2012 WIB SYMPOSIUM PENNSYLVANIA ASSOCIATION OF WORKFORCE INVESTMENT BOARDS Related literature at: August 16, 2012 Penn State Hotel &http://www.diigo.com/user/davidpassmore/psu- Conference Center State College, PA ethane
  • 58. INSTITUTE FOR RESEARCH IN TRAINING & DEVELOPMENT INSTITUTE FOR RESEARCH IN TRAINING & DEVELOPMENTCRACKING THE ETHANE CRACKER ROSE M. BAKER DAVID L. PASSMORE