Potential Uses for Sunoco Marcus Hook Refinery

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Press release from IHS Consulting announcing the results of a study there were commissioned to write (for $100K), about the potential uses for the now-idle petroleum refinery in Marcus Hook, PA (near Philadelphia). The study says that powered by natural gas and natural gas liquids from the Marcellus and Utica Shale region, the refinery can have a second life much like its first life.

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Potential Uses for Sunoco Marcus Hook Refinery

  1. 1. Published on IHS Online Pressroom (http://press.ihs.com) on 6/27/12 1:08 pm EDTNew IHS Study Offers Potential Options for Reuse ofSunoco Marcus Hook Industrial Complex Located NearPhiladelphiaRelease Date:Wednesday, June 27, 2012 1:08 pm EDTTerms:Energy & Power Energy & Power MediaDateline City:HOUSTONSays IHS: Growth of US shale plays enable viable reuse options andpotential economic ’second life’ that otherwise wouldn’t exist foraging refineriesAccording to a new study from IHS (NYSE: IHS), the leading global source of information and analytics, thephenomenal growth of shale oil and gas plays in the U.S. makes possible several reuse options thatotherwise wouldn’t exist for the Sunoco Marcus Hook Industrial Complex, a former oil refinery located southof Philadelphia on the banks of the Delaware River that was shutdown in December 2011.When operational, the refinery, which sat on a 780-acre site, processed 175,000 barrels per day of crude oilinto a wide range of petroleum and petrochemical products and was responsible for nearly 500 direct jobsin Delaware County, Pa. One of the nation’s oldest refineries, it had been in operation since 1902, and hademployed several generations of workers from the region.“We identified several possible reuse options for the Marcus Hook facility, and what is interesting is thatmost of these opportunities are possible only as a result of the recent, phenomenal growth of the U.S. shaleoil and gas plays,” said Brendan O’Neil, managing director for IHS Consulting. “Without these plays, theoptions available to Marcus Hook would be more limited, and if pursued, could potentially provide aneconomic ‘second life’ to the complex, which has been a part of the Delaware County community since1902.”IHS was commissioned to conduct the independent study by the Delaware County Council, whichappropriated funds and directed the Industrial Development Authority to undertake the study. The purposeof the study is to identify potential future redevelopment concepts that can best utilize the site’s assets tomaintain employment levels and perpetuate a sustainable local economy in Delaware County and the EastCoast region.Said O’Neil: “Despite the fact that they don’t own the site, the Delaware Council was very proactive inseeking an independent assessment for reuse of this facility, which may serve as a model for othercommunities who are likely to face similar industrial shutdowns in the future — it shows a willingness tobring industry and community together to solve problems and to create economically sustainabledevelopment.”To prepare the study, IHS called on its experts from across the organization — economic analysis from IHSGlobal Insight, chemical insight from IHS Chemical —including expertise from recently-acquired Purvin &Gertz, and energy perspective from its experts at IHS CERA. In compiling its assessment, IHS first conductedan economic profile of the region and then followed with a supply/demand analysis of the markets forpotential alternative uses based on two broad categories: energy products storage and Marcellus shale- 1
  2. 2. based downstream chemical production.IHS examined seven potential reuse options for the Marcus Hook facility. Five energy-based options: 1)Natural gas liquids processing and fractionation facility; 2) Gas-to-liquids production and storage facility; 3)Liquid natural gas liquefaction and export terminal; 4) Refined petroleum products import terminal; 5)Natural gas driven power generation, as well as two Marcellus shale chemical-based options: 1) Ethanecracking and derivatives; and 2) Propane dehydrogenation.According to the IHS study, while a market analysis of the seven reuse options all showed promise, someoptions had greater viability than others. The East Coast is advantaged, the report noted, in that it laysadjacent to the Marcellus shale development, a large geologic formation, despite the fact that productionfrom this region contains only minor crude oil and condensate production. A summary of the marketpotential of each option, as well as their job-creation potential and estimated capital costs, are shown in thechart below. Estimated Job Market Capital CreationProposed Reuse CommentsOptions Viability Costs Potential (Millions$) (FTEs)Propane $300 to Existing polypropylene plant at site (Braskem) is High 50 to 75Dehydrogenation $400 ready buyer of output from this reuseNatural Gas Liquids $300 to 75 to Synergies exist with existing plant infrastructure, HighProcessing Facility $400 100 lowering overall investment costsRefined Petroleum $50 to Minor modifications required for reuse; increasing High 45 to 55Products Storage $100 local demand for petroleum productsNatural Gas Power $650 to 75 to Facility well positioned in mid-Atlantic markets; MediumGeneration $750 100 dwindling number of coal-burning plantsEthane Cracking and $2,500 to 150 to High demand for polyethylene resins; site has HighDerivatives $3,000 200 competitive logistical advantagesLiquified Natural Gas $2,000 to 150 to Strong overseas market; several LNG plants LowExport Terminal $2,500 200 already have applied for permission to exportGas-to-Liquids $4,000 to 300 to Diesel markets especially attractive on the East LowProduction/Storage $6,000 400 CoastSource: IHS—Sunoco Marcus Hook Industrial Complex Economic Opportunity Reuse StudyWhile the IHS study notes that deeper analysis is needed to fully discern the potential rate of return oncapital of repurposing options, the reuse of Marcus Hook for shale-based chemical processing, natural-gasliquids processing, and refined petroleum storage suggest the greatest market potential. However, the IHSstudy authors cautioned that job creation related to any of the reuses will not fully offset the jobs lost torefinery closure.“This refinery is the primary economic engine that has supported the region for decades, so the future ofthis community is dependent upon our ability to identify and facilitate new, economically sustainable usesfor the site,” said Tom McGarrigle, chairman of the Delaware County Council. “However, the complexity ofthe issues involved required that we enlist a respected research firm who could take a multi-dimensional 2
  3. 3. look at the situation. Only IHS had the depth and breadth to assess the economics, the regional and globalmarket trends, as well other issues relative to energy and chemical markets and industries. We are pleasedwith the findings of the study, because they offer some viable, positive paths forward for the Marcus Hookcomplex and for our communities in Delaware County.”“With the recent shale developments and the abundance of cheap natural gas, the U.S. now has a feedstockcost advantage over most other regions of the world for producing certain petrochemical products, such asethylene or propylene,” said Anthony Palmer, managing director, IHS Chemical. “Both of these are possibleproducts that the Marcus Hook complex could deliver with modifications. Another reuse option for MarcusHook is for storage of refined petroleum products, which could leverage the site’s five underground granitecaverns for liquids. There are some infrastructure issues that would need to be addressed for each of theproposed uses studied, and a more in-depth assessment would certainly need to follow, but these optionsare viable.”And according to Palmer, this study also may offer hope to other communities that are home to agingrefineries like the Marcus Hook complex, which are also facing closure due to a host of factors that haveimpacted demand and profitability for refined petroleum products.The main contributing factors to these proposed shutdowns, he said, include fuel substitution driven by U.S.legislation mandating that more biofuels be injected into the U.S. transportation fuel pool; stagnantdomestic demand for petroleum products driven by the economic recession of 2008 to 2009; a highlycompetitive U.S. refining landscape that favors larger, more sophisticated Gulf Coast refineries, andlogistical isolation. “Unfortunately,” Palmer said, “many East Coast refineries are located too far from keysources of feedstock production to be cost competitive.”According to the IHS study, of 11 East Coast refineries only six are currently operating, and one of those six,the Sunoco Philadelphia facility, is for sale. Unless a buyer is found soon for the refinery, it will be shutdownmid-year 2012. The ConocoPhillips Trainer refinery in Pennsylvania also was shutdown in 2011, but isscheduled to restart at the end of 2012 by new owner Monroe Energy. Combined, these three DelawareRiver corridor refineries produce nearly 700,000 barrels per day of refined products, or 50 percent of thetotal East Coast region’s refining capacity, which includes facilities from Maine to Florida.For more information on the IHS Sunoco Marcus Hook Industrial Complex Economic DevelopmentOpportunity Reuse Study, please contact brendan.oneil@ihs.com. To speak with Anthony Palmer or otherstudy authors, please contact melissa.manning@ihs.com, or press@ihs.com.About IHS (www.ihs.com)IHS (NYSE: IHS) is the leading source of information, insight and analytics in critical areas that shape today’sbusiness landscape. Businesses and governments in more than 165 countries around the globe rely on thecomprehensive content, expert independent analysis and flexible delivery methods of IHS to make high-impact decisions and develop strategies with speed and confidence. IHS has been in business since 1959and became a publicly traded company on the New York Stock Exchange in 2005. Headquartered inEnglewood, Colorado, USA, IHS employs more than 6,000 people in more than 30 countries around theworld.IHS is a registered trademark of IHS Inc. All other company and product names may be trademarks of their respectiveowners. © 2012 IHS Inc. All rights reserved. ###Language:EnglishContacts: IHS Media Relations Melissa ManningSource URL: http://press.ihs.com/press-release/energy-power/new-ihs-study-offers-potential-options-reuse-sunoco-marcus-hook- 3
  4. 4. Source URL: http://press.ihs.com/press-release/energy-power/new-ihs-study-offers-potential-options-reuse-sunoco-marcus-hook-industria 4

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