Posted on 09/23/2015 5:59:32 AM PDT by thackney
The underlying economics are still good and the concept remains solid, but the prospect of finding enough qualified people to actually build and staff it is too daunting – at least for now. Such are the conclusions of Houston-based Appalachian Resins, Inc. (AR), whose board earlier this month decided to put its "less-than-world-scale" ethane cracker project in Monroe County, Ohio, on hold.
"Looking at the timing, we are not able to get ahead of the two other projects," Bob Mifflin, AR's president, told Rigzone.
The "two other projects" to which Mifflin refers are world-scale ethane crackers proposed by PTT Global Chemical (PTTGC) and partner Marubeni Corp. in Belmont County, Ohio, and Shell Chemical in Beaver County, Pennsylvania. Like AR, PTTGC/Marubeni and Shell have been considering building ethane crackers in Appalachia to leverage plentiful natural gas liquids (NGL) feedstocks from the region's Marcellus and Utica shale plays.
Mifflin explained that the larger, multibillion-dollar projects are on track to reach critical development milestones before AR. For instance, he noted that Shell has already secured its air permit and land for the facility. Consortia led by Bechtel Enterprises Holdings Inc. and Fluor Corp. are spearheading preliminary front-end engineering design work and cost estimates for the PTTGC/Marubeni project, President and CEO of PTTGC Supattanapong Punmeechaow, said Sept. 3, during the project announcement with Ohio Gov. John Kasich. Thailand-based PTTGC expects the project's feasibility study to conclude within the next year.
AR, meanwhile, has begun detailed engineering and might keep that process going. However, it has encountered delays in acquiring a lease for the approximately 50-acre site along the Ohio River that it has targeted for development. Moreover, it has not secured its environmental permits.
Mifflin pointed out that having at least three ethane cracker projects underway in the region would result in a "severe manpower draw." He estimates that AR's project would need 500 to 700 workers during construction while one of the world-scale projects would require approximately 1,500.
Jim Cutler, AR's chief executive officer, said that his company would be at a disadvantage compared to Shell and PTTGC/Marubeni – with their greater financial wherewithal and longer project time frames – in finding qualified workers who can properly build and staff a petrochemicals plant.
"Being project-financed, and an uncertain construction climate, puts pressure on AR to have a turn-key construction contract," said Cutler. "This requirement substantially increases project cost."
In addition, the numerous petrochemical projects underway on the Gulf Coast – a region with much deeper ties to the industry compared to Appalachia – will likely limit the number of skilled workers willing to move to a job upward of a thousand miles from home, Cutler noted.
Neither Shell nor PTTGC/Marubeni has made a final investment decision, but Cutler is particularly confident that the latter developer will build an ethane cracker in the Ohio Valley. Mounting political unrest in Thailand is motivating PTTGC, whose owner is the Thai government, to pursue foreign investments in safer havens, he explained.
"The PTT Global project unquestionably is good for Ohio and the region in general," Cutler said. "Both Governor Kasich and JobsOhio are actively supporting the project. Everything is moving fast-forward."
"A consequence that the PTT Global project may trigger is that it will tighten skilled labor availability in the Ohio Valley," continued Cutler. "This event could potentially increase overall construction costs in the region and could delay some projects."
Despite the decision to put its project on hold, AR might resume development of it "less-than-world-scale" ethane cracker once larger projects in the region – if they go forward – have passed peak construction and no longer need as many skilled workers, said Mifflin.
"There are a lot of unknowns right now," he concluded. "The concept of a regionally sized ethane cracker in areas that don't have a developed infrastructure was well-received. We are continually examining development opportunities and could reexamine moving forward in Ohio when conditions warrant."
Appalachian Resins is a start up company that is developing an integrated ethylene and polyethylene production facility. The facility’s raw material will will be ethane obtained from Marcellus Shale Gas. The plant will be located in West Virginia.
The proposed facility will produce 508 million pounds per year of ethylene and 500 million pounds per year of polyethylene. This less than “world scale” production facility is sized to accommodate the needs of an identified local market.
Appalachian Resins’ proposed production facility will enhance supply chain logistics and stabilize regional polyethylene price swings.
Appalachian Resins signs LoI to lease land for $1bn ethane cracker in Ohio, US
http://www.chemicals-technology.com/news/newsappalachian-resins-signs-loi-to-lease-land-for-1bn-ethane-cracker-in-ohio-us-4355198
27 August 2014
Appalachian Resins has unveiled plans to lease land in Salem Township, Ohio, US for its proposed $1bn ethylene / polyethylene production facility.
The company has signed a land lease letter of intent with Monroe County (Ohio) Port Authority for 50 acres of land for the project.
Appalachian Resins CEO James Cutler was quoted by DownstreamToday as saying in an emailed statement: “There is no difference in our development activities, we have essentially only moved across the Ohio River.
“We will not be integrating with an existing operating (brownfield) facility, but will be more of a ‘greenfield’ location. However, we will have improved rail facilities.”
The company initially planned to build the ethylene / polyethylene plant in West Virginia and make use of natural gas liquids from the nearby Marcellus and Utica shale formations.
However, due to business and commercial reasons, and to accommodate a larger production facility, Appalachian Resins has selected Ohio.
Cutler said: “The AR less than world-scale business model, besides fitting into the existing Marcellus fairway infrastructure, supports polyethylene supply chain resiliency.”
Planned to commence operations in early 2019, the facility will process around 18,000 barrels per day of ethane into ethylene and polyethylene to produce 600 million pound per year.
Cutler added that the ethylene plant will be designed to operate as a master limited partnership (MLP), while the polyethylene plant will not meet the criteria as an MLP.
“The polyethylene plant will purchase its ethylene requirements, under long-term contract, from the ethylene plant.
“The polyethylene plant will market its output to an off-taker under long-term contract.
That’s rayciss!
That’s “saltine american” to you...
If I am understanding this correctly, this is the nugget in this article.
Jobs Ohio and Governor Kasich have used the power of government regulation and red tape to ensure that the big (foreign) guy wins out over the little guy. The only thing I don't understand is why Cutler (the CEO of the defeated little guy) is so congratulatory toward PTT Global. Looking for a job, perhaps?
They can’t get some Syrians to do this work?
Oh BS! People moved to Alaska to build the pipeline, they moved to North Dakota...they damn sure will move to Ohio.
I bet the reason is Shell is building one way bigger.
The amount Ethylene Shell would use might make supply short.
Dominion has a smaller cracker plant in WV.
Is “less than world scale” like “not ready for prime time”?
Sure, if you pay enough. With two major projects of similar type already started, the economics for this smaller one doesn't work out if it is done under inflated rates. The market for their product will be driven down some by the others coming in first.
It is not enough to build it at any cost. Once those other two near completion, there will be skilled hands in the area that are looking for the next job. Cheaper than trying to buy them away from existing work or paying rates high enough to bring them in from other areas.
Shell’s unit is a ethane cracker. It takes in ethane and produces ethylene.
About Shell Chemicals > Our growth projects > Appalachian petrochemical project
http://www.shell.com/global/products-services/solutions-for-businesses/chemicals/about-shell-chemicals/our-growth-projects/marcellus-cracker-project.html
The are considering adding polyethylene units but have not announced that yet.
The very low price of gas is what has put these projects on hold.
Plus here in PA it is being used as a sword to dangle over the head of Gov. Wolf every time he starts proposing new taxes on the shale industry.
The very low price of natural gas and natural gas liquids is why these plants are being built. They don't sell gas and associated liquids, they buy them. They sell more complicated chemical products made with that gas and gas liquids.
The actual natural gas is not a feedstock for the ethane cracker, but it is used as fuel to produce heat used in the process. The cheaper the gas is, the better the profits for an ethane cracker.
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