Within the next two to three years, the region should start to see additional plastics manufacturers arriving in the region to take advantage of cheap polyethylene pellets being produced here, an economic development official said Thursday.
Pittsburgh Regional Alliance President David Ruppersberger made the comment while participating in a panel discussion during the second day of the annual Shale Insight conference at the David L. Lawrence Convention Center.
The conference is sponsored by the Marcellus Shale Coalition, Ohio Oil and Gas Association and West Virginia Oil & Natural Gas Association.
The three other participants on the panel were Shell executives involved with the construction of the company’s ethane cracker plant in Beaver County, which in two to three years will begin producing about 1.6 million tons of polyethylene pellets a year for customers in a 700-mile radius of the plant.
Todd Whittemore, a chemical engineer who is Shell’s global technology manager for polyethylene, told the audience of a couple hundred attendees that the product has an array of uses for the companies that purchase it, including plastic film, packaging and pipes.
The $6 billion cracker plant near Monaca, which will require 6,000 construction workers and will hire 600 permanent workers, is one of the largest economic development projects in the United States.
While Shell has spent the past few years remediating and prepping the site of the former Horsehead zinc smelting site in Center Township, the actual construction of the cracker plant is now under way.
Jim Sewell, who works in government relations for Shell, described the various permits the company has received along the way both for remediation and air and water quality compliance. He said Shell is now working on a permit for a water treatment plant that also will serve Center Township.
“We’re getting fairly close to having all of our permits in place,” he said.
Whittemore explained that up until now, workers have been doing “massive amounts of civil (engineering) work,” including underground piping, sewerage and foundations.
In 2018, he said, the actual equipment for the plant will be delivered via the Ohio River, with piping, instrumentation, painting and insulation to take place.
“There will be big skyline changes next year,” Whittemore said, adding that Shell has not constructed a new site in the U.S. since the 1960s. He said part of the prep work included the construction of two docks along the Ohio River for the delivery of the cracking equipment.
The plant will include seven furnaces. Ethane will arrive at the site and will enter the furnaces, where it will be heated for a few seconds at 1600F, then cooled, completing its conversion to ethylene. The ethylene will be sent to polyethylene units to create several types of polyethylene, which is produced as a powder.
The powder is then mixed with additives and placed into an extruder that chops it into pellets that are shipped by rail or trucks to customers.
When asked by MSC President David Spigelmyer when the company expects to begin pellet production, Whittemore said it should begin doing business with plastics manufacturers in two to three years.
He added that Shell expects to be producing the pellets here for a long time.
As part of its due diligence in planning for the cracker, “We made sure we had the ethane supply contracts,” he said, adding that the company has 10 contracts from natural gas suppliers, some of which are for as long as 20 years.
While stating that the region should begin to see additional plastics manufacturers arrive in the next few years, Ruppersberger said PRA does not believe there will be as many newcomers as others have estimated.
However, he said, the cracker itself will create many jobs beyond the 600 Shell will employ directly at the plant, including many indirect jobs that will support the cracker’s needs.
One of those, he said, is the expectation that a large industrial gas company will bring operations here to supply nitrogen to the cracker.
Ruppersberger also discussed the possibility of bringing an ethane storage hub to the tri-state region to maintain a large supply of ethane to attract more plastics and petrochemical manufacturers here.
“We think it’s absolutely essential” for growing and adding to the plastics and petrochemical production base in the region, he said, adding that the expectation is for additional crackers to be built in the area.
The planning for the hub is being led by researchers at West Virginia University, and last month a team of geologists released a report stating that multiple sites exist for constructing the hub, which would be underground.
“If something like that would come into being, we would welcome that,” Whittemore said.
He said one of the advantages to building the cracker here is that it enables Shell to meet customer demand within a day’s drive of Monaca, where about 70 percent of its customer base is established.
Currently, the pellets are shipped by rail from production sites on the Gulf Coast.
Whittemore said by producing them here, so much closer to most customers, the company will have a cost advantage to pass on.
He also acknowledged that adding a cracker plant here will provide security if the Gulf Coast facilities are closed by hurricanes, as they were recently.
“The double location advantage is what made us want to invest here,” he said.