August 2014

Shell Ethylene Cracker is unlikely to be the only cracker in the Appalachian Basin. It seems to go against the grain, with the highly interconnected chemical industry and support industries concentrated in the Texas – Louisiana gulf coast. There is are solid reasons for more ethylene crackers in the Appalachian Basin. First group of reasons has everything to with Shell’s decision. Downstream consumers of ethylene will want an alternative source of supply in case Shell’s crackers has issues or is down for maintenance. They also see the same prize, a polyethylene market with-in 500 miles that is almost 50% of the US total demand. By being closer to the customer they can be more responsive to demand and avoid the logistics costs shipping ethane to the gulf coast and back as polyethylene.

Innovative companies are also challenging scale and interconnected nature of the Chemical industry. Historically US ethylene crackers have been designed to run on mixed feedstocks, being able to take anything from Naphtha a refined form of crude oil to butane, propane and ethane. This allowed the ethylene crackers to take advantage of changes in feedstock price. It also results increased production other products such as butadiene which have value. Mixed feedstock plants as opposed to pure ethane feed plants are, as a result, far more capital and people intensive.

Ethylene crackers were historically also built as big as possible, as doubling a cracker size did not double the capital cost or labor to run the run the plant. To get to these large ‘world scale’ crackers additional chemical units beyond polyethylene needed to be built to consume the ethylene. Thus not only were you building an ethylene cracker and polyethylene unit, but also ethylene oxide, ethylene glycol and so on. Thus your capital costs, operational complexity, land requirements, permitting, need to market and sell multiple products and project risk increased in proportion.

A new concept is emerging that could serve the Appalachian basin, which does not have the large tracks of land needed and complex infrastructure to handle the downstream products. Build only an ethylene cracker and polyethylene unit, with its far lower capital costs and risks. Serve the local demand, lowering logistics costs. This will require unconventional thinking, but isn’t that what drove the shale gas revolution?

Stop thinking of just ethylene and polyethylene. The new propane dehydrogenation process to propylene for the high volume plastic polypropylene is next