* Demolition at existing Monaca, Pennsylvania, site ongoing
* Purchase of site advances permitting process
* Shell has yet to make final decision to build ethane cracker
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Shell Chemical has exercised its option to purchase the site of a former Horsehead zinc smelter in Beaver County, Pennsylvania, for a proposed ethane cracker, Horsehead said Friday.
The proposed $4 billion ethane cracker would be the first of its kind in the US Northeast.
The closing date and the total cost of the purchase were not disclosed; Shell extended the option to purchase the property along the Ohio River three times prior to making its final decision.
After signing the third extension in December 2013, Horsehead began demolition work at the site in 2014 at Shell's expense.
The option agreement to convert Horsehead's 300-acre zinc smelter in Monaca, Pennsylvania, into an ethane cracker and petrochemical complex was initially signed in March 2012.
"Shell can confirm the statement by Horsehead Corporation that we are exercising our land option to purchase Horsehead's property in Beaver County, PA, having determined that the site is suitable for the potential development of our proposed facility," spokeswoman Kimberly Windon said in an email Friday. "However, we have not made a final decision to build the project; we will make that decision when our full project evaluation is complete. The land purchase is a necessary step for Shell to advance the permitting process and allows us to proceed with some preliminary site development work. Shell has consistently noted that receipt of the necessary permits is required before we can reach a final investment decision."
In early May, Horsehead said it had stopped operation at its Monaca facility and moved its zinc plant to Mooresboro, North Carolina. Horsehead said in a second-quarter earnings call it plans to complete demolition at the site in early 2015.
In early November 2013, Shell Chemical took a major step forward on the proposed project by selecting the Linde-Bechtel partnership to perform the front-end engineering and design work for the ethane cracker, according to a report in the Platts Global Polyolefins Outlook.
The report offered the best indication yet that Shell intends to cash in on the Marcellus Shale gas reserves by building an ethane cracker and three corresponding polyethylene units.
Shell's ethane cracker, expected to be completed in 2019, would feed production of 1.5 million mt/year of ethylene, 500,000 mt/year of gas-phased high density polyethylene, 500,000 mt/year of slurry HDPE, and 500,000 mt/year of linear low density polyethylene, the report said.
The contract also includes a Linde license for the ethylene production.
In August 2013, Shell said it had secured ethane supply commitments from Hilcorp Energy, Consol Energy, Seneca Resources and Noble Energy, and was to complete supply commitments by October 2013.