According to the Wall Street Journal, analysts are beginning to wonder whether new pipelines designed to move Pennsylvania ethane to Texas and Louisiana could "erase Shell's advantage and torpedo its plans entirely."
Why? Well, while the Marcellus shale is rich in natural gas, the land around it isn't full of plants to process it. Meanwhile, companies have over-invested in building processing plants in the Gulf Coast region.
Since Shell announced the Pennsylvania cracker, three pipeline projects also have been announced. The pipelines could carry up to 600,000 barrels per day of ethane and other liquids from the Marcellus region (where there are no processing plants) to the Gulf Coast (where they have processing capacity to spare).
"Even though Pennsylvania would seem to have a home-field advantage, sitting atop so much ethane, the state can't compete currently with the Gulf Coast's massive infrastructure, home to millions of barrels of ethane storage and pipelines feeding nearly a dozen petrochemical complexes and plastics plants," the Journal reported.
Given that, Rusty Braziel, an analyst with consulting firm RBN Energy Inc., said Shell's Pennsylvania plan "fundamentally doesn't make sense to me."
Peter Molinaro, vice president and senior adviser on government affairs for The Dow Chemical Co., spoke at an energy summit in Pennsylvania earlier this month.
According to the Pittsburgh Business Times, Molinaro also said building a new plant doesn't make sense given the existing unused infrastructure along the Gulf Coast.
"Like anything else in commodities there is only so much that can be built and the chemical industry has over built in the past," he said.
But don't lose hope. While he said the Marcellus region doesn't need a cracker, he did say the area is ideal for other downstream manufacturing, such as plastics. He said the region's proximity to population centers, the transit network and the number of universities for research are ideal for this development.