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Appalachian petchems storage hub faces 'chicken-and-egg' issue: researcher

Pittsburgh — The dream of building an Appalachian petrochemicals storage and trading hub will likely not become fully realized until several more international corporations make final investment decisions on whether to build ethane crackers in the region, an academic researcher advocating for the project said in Pittsburgh Tuesday.

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Mountaineer NGL currently plans to build what might be the first part of a multi-owner, multi-site complex of petrochemical storage facilities in the region that encompasses southwestern Pennsylvania, Ohio, West Virginia and northern Kentucky, Brian Anderson, director of the West Virginia Energy Institute, said on the sidelines of the Platts Appalachian Oil and Gas Conference.

Mountaineer is moving forward with plans to begin work on a salt-cavern storage facility in Ohio. The company is targeting a 2018 start of service for the first of four 500,000-barrel caverns, with the potential to construct up to eight caverns for a total capacity of 4 million barrels.

The construction of the Mountaineer facility "would provide a significant amount of support for one cracker," Anderson said.

Shell Chemical in June 2016 announced it had made an FID on plans for a world-scale ethane cracker in Beaver County, Pennsylvania, to take advantage of the ethane produced in association with natural gas production in the Marcellus and Utica shale plays.

The proposed $4 billion plant would be the first of its kind in the US Northeast and is expected to kick-start the creation of a petrochemical manufacturing and trading industry in the region.

Two other steam crackers proposed for the region are awaiting FIDs. One such plant, proposed by Thailand's PTT Global Chemical, would be built in Ohio, "just across the river from Moundsville, West Virginia, in an old FirstEnergy power plant site," Anderson said. PTT is expected to make an FID announcement in the fourth quarter of 2017.

PTT's potential "cracker is a slightly smaller one that Shell's," Anderson said. The proposed Shell facility is expected to produce 1.4 million mt/year of ethylene. "PTT is more like 1 million" mt/year, he said.

The third cracker project was proposed by Brazil's Braskem. "That particular project has slowed down significantly for a lot of reasons," related to economic problems in the company's home country, he said.

As more projects to convert ethane into ethylene are proposed for the region, the need for petrochemical storage will increase dramatically, Anderson said.

"We will start to need 10, 15 to 20 million barrels (of storage capacity) as we move forward into the next decade," he said.

However, he added that before that level of storage can be built, the midstream industry would first need to construct the pipeline infrastructure to transport the ethane and other products across the region.

"It is much more about the connectivity of pipelines and the ability to move product from one location to another. And that connectivity is not just for ethane, but for propane, propylene," he said.

One reason why extensive pipeline infrastructure needs to be built in Appalachia involves the geology of the region, and how it differs from that of Mont Belvieu, Texas, site of the nation's most important petrochemical storage and processing complex, Anderson said.

"At [Mont] Belvieu, we have one big salt dome and that brings you into one spot. In our region, we have to have a distributed network. We don't have miles and miles of flat, river-bottom industrial land," he said.

The situation that the Appalachian region finds itself in regarding the construction of petrochemical processing and storage facilities is "a chicken-and-egg issue," Anderson said.

Adding: "If we had three final investment decisions on three crackers, then we would be moving much faster potentially than we are in the current situation, with one final investment decision."

--Jim Magill,
--Edited by Keiron Greenhalgh,