Cracker economics and W.Va.’s future
TWO years ago, Ohio, Pennsylvania and West Virginia competed to be the location of Royal Dutch Shell's proposed ethylene cracker, which converts natural gas into a key ingredient for plastic.
Pennsylvania won the race for the $2 billion project. Still West Virginians were confident that the state would land spinoff jobs.
But Shell's earnings fell, management is changing and there is a realization that it may be cheaper to ship the gas from the Marcellus shale formation to existing crackers in the Gulf Coast region.
That has cast doubt over the Pennsylvania cracker proposal.
Simon Henry, Shell's chief financial officer, said the company will sell some assets in the next two years to boost cash flow and that officials will need to make decisions next year about whether the company will move forward with some new projects.
"We have reached critical mass with our 2015-plus investment option set," Henry told investors, "and there will be decisions to make in the next few quarters on which options to take to final investment decision, especially in our global integrated gas business."
There are other considerations that make the cracker less likely, including the lack of chemical plants in the area.
A few decades ago, who would have thought that? But the Chemical Valley of Kanawha County is more like the chemical hollow after decades of declines in re-investment, as companies looked elsewhere to make profits.
However, a cracker may still be in the works.
Aither Chemicals is working on a catalytic cracker. Aither is a spin-off of the Mid-Atlantic Technology, Research and Innovation Center, which is located in Union Carbide's old Tech Center.
Using new technology, Aither could build a cracker for one-third of the price.
But not gaining a cracker is not all bad either.
The state government and some residents will continue to rake in money from the royalties from Marcellus shale. The state of North Dakota does quite well from the hydraulic fracking of its Bakken oil field without refineries.