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Cracking the Ethane Cracker
The document discusses the potential development of an ethane cracker in Beaver County, Pennsylvania, led by Royal Dutch Shell, highlighting the substantial risks and uncertainties involved. It summarizes a presentation from the 2012 Pennsylvania Workforce Investment Boards Symposium, examining the economic implications of a possible petrochemical complex including job creation and tax incentives. It notes the challenges of processing ethane from the Marcellus shale and provides insights into the natural gas liquids' economic landscape.
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Cracking the Ethane Cracker
- 1. INSTITUTE FOR RESEARCHIN TRAINING & DEVELOPMENT INSTITUTE FOR RESEARCH IN TRAINING & DEVELOPMENT CRACKING 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 AVAILABLEAT 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 timeline A WORLD–SCALEPETROCHEMICAL COMPLEX IS INTRICATE AND TYPICALLY TAKES FIVE YEARS OR MORE TO BUILD, FROM PLANNING TO START-UP.
- 9. Shell’s timeline SHELL MUSTCLEAR MANY HURDLES BEFORE IT CAN EVEN MAKE AN INVESTMENT DECISION.
- 10. Natural gas liquids “valuechain gauntlet”
- 11. Shell’s timeline NEED TOCONFIRM THE SUITABILITY OF THE SITE, SECURE ETHANE SUPPLY, COMPLETE ENGINEERING AND DESIGN WORK, CONFIRM THE SUPPORT OF CUSTOMERS FOR PRODUCTS, RECEIVE ALL NECESSARY PERMITS AND DETERMINE WHETHER THE PROJECT IS ECONOMICALLY SOUND AND COMPETITIVE WITH ALTERNATIVE INVESTMENT OPPORTUNITIES.
- 12.
- 13. Discuss 4 topicstoday…. • Natural gas liquids. • Ethane ethylene: cracking. • American Chemistry Council (ACC) economic forecasts. • Several quick, back– of–the–envelope forensic analyses.
- 14.
- 15. Review of gaswell production
- 16. What comes outof 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.
- 18. Raw natural gasis 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 naturalgas liquids (Energy Information Administration)
- 24. ETHANE ETHYLENE: CRACKING
- 25. ETHANE MUST BE“CRACKED” TO MAKE ETHYLENE
- 26. THE CRACKING PROCESSINVOLVES BREAKING UP THE CARBON AND HYDROGEN MOLECULES AND REARRANGING THEM.
- 27. CRACKING IS ACCOMPLISHEDBY HEATING ETHANE TO GREATER THAN 800°C (1500°F) IN THE CRACKER FURNACE.
- 28. CRACKING CAN BEENERGY–INTENSIVE AND A SIGNIFICANT SOURCE OF GREENHOUSE GASES.
- 29. Ethylene processed intwo ways In 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 & oilprices
- 31. Ethane & naturalgas prices
- 32. A few ethaneprocessing 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 ethaneprocessing 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 gap Pennsylvania has naturalgas… but no ethane processing
- 35. AMERICAN CHEMISTRY COUNCIL ECONOMIC FORECASTS
- 36. American Chemical Council March2011 national report http://www.americanchemistry.com/ACC-Shale-Report
- 37. August 2011 Addendumfor PA http://goo.gl/1I76J
- 38. ACC national reportexamined… • 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 reportfound… From 25% increase in chemical industry output:
- 40. ACC national reportfound… From 25% increase in chemical industry output: (billions)
- 41. ACC national reportfound… 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 forPennsylvania
- 45. ACC report forPA found… From $4.8 billion increase in PA chemical industry output:
- 46. ACC report forPA 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 they're the best available.” • A cabinet member cautioned, “it's 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 they're the best available.” Labor & Industry • A cabinet member study is anticipated cautioned, “it's almost an impossible number to clear this up. to nail down.”
- 50. SEVERAL QUICK, BACK–OF–THE–ENVELOPE FORENSIC ANALYSES
- 51. Three analyses • Ifthe 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 directjob 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 aboutthe next 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 whenchemical industry output is 25% > than baseline, 2017–2021
- 55. Chemical industry employmentif output is 25% > than baseline, 2017–2021
- 56. Ours are analyses, notforecasts • 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 AVAILABLEAT 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 RESEARCHIN TRAINING & DEVELOPMENT INSTITUTE FOR RESEARCH IN TRAINING & DEVELOPMENT CRACKING THE ETHANE CRACKER ROSE M. BAKER DAVID L. PASSMORE
Editor's Notes
- #58 Web site available