The battle between states in the Appalachian Basin and along the Gulf of Mexico Coast to secure the newest $5 billion ethane cracker is more than building costs, or the cost of transporting raw materials to facilities, and polyethylene-produced pellets to customers.
It’s more than securing enough construction labor at a time when other, large construction projects are vying for the same workers.
Part of the mix in making the FID, the Final Investment Decision, comes down to a single, four-letter word:
Risk, according to Tom Gellrich.
“It may be a $5 billion bet for a company – but if you are the company CEO, you are betting your career on this decision,” according to Gellrich, founder of consulting firm TopLine Analytics.
Gellrich spoke at Kallanish Energy’s half-day program CSP: Crackers, Storage, Pipelines 2018, held last Wednesday in the Southpointe Business Park, south of Pittsburgh.
Gellrich said any new location in the Appalachian Basin contains unknowns when a construction project begins. “There also is the risk of public support or challenges, and local community acceptance,” according to Gellrich.
Shell’s ethane cracker project, located roughly 35 miles northwest of Pittsburgh, in Beaver County, Pa., has been relatively free of major protests by the public, and the community – Western Pennsylvania overall – has been relatively pro-project.
But Gellrich told Kallanish Energy after his presentation there is no question protests are coming as the cracker edges closer to completion.
Unlike the Gulf Coast, the availability of large parcels of land along the Ohio River (used to bring in huge pieces of equipment and possibly polyethylene pellets) are not a sure thing.
“Suppliers, a trained and educated labor pool and needed road, rail and barge infrastructure can be a risk,” according to Gellrich, all of which the Gulf Coast has, but the Appalachian Basin may be lacking.
One of the biggest needs the Appalachian Basin needs, something the Gulf Coast has in abundance, is ethane storage capacity.
The basin has the ethane in the natural gas stream to supply more than one cracker, but the elaborate facility of miles of pipes does not operate on a day-ahead schedule, Gellrich said.
“Shell needs storage for its cracker – you can’t run such a plant with one day of ethane,” Gellrich told his CSP audience.
Two storage facilities have been proposed. A privately-built, 3-million-barrel (MMBbl) project is moving through the Ohio permitting process now, but won’t begin offering storage until the second quarter of 2020. (See accompanying story.)
A giant 75 MMBbl to 100 MMBbl public-private storage project is seeking funding as a definitive location still must be selected.
Source: Daily Dose of ShaleDirectories.com News
https://www.shaledirectories.com/blog/cracker-related-risk-impacts-project-construction/
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