This story on ethane is significant in showing the morphing of completely unpredicted shale gas to something completely unpredicted in chemicals which will lead to completely unpredicted riches.
The actual predictions of Marcellus shale gas volumes have now shown to be overly cautious, with massive volumes even at this early stage. But the story that started developing last year is that the associated ethane coming out of the wells is even more surprising. No one was even thinking about ethane two to three years ago, but now it's coming out of the ground in prodigious and even more valuable quantities.
Without getting too chemical, ethane is isolated from either natural gas production or as by-product of oil refining. The amount of ethane depends on geology, with some wetter shales having more ethane. Dry shales like the Barnett and Haynesville have some, but no where near as much as the Marcellus. Other shales like the Bakken, Eagle Ford and Utical are oilier.
Ethane is the feedstock for ethylene production, which is the raw material for plastic.
Ethylene is produced either from ethane, or from naphtha via oil refining. So replacing naphtha is replacing oil. Displacing oil is displacing imports, which displaces several billion dollars from the US current account deficit.Ethylene production and the chemical industry in general has had a major move towards the Persian Gulf in recent years. Replacing naphtha replaces oil and money and creates jobs far beyond those created in shale alone.
There are current plans to build a cracker to produce ethylene in the Western Pennsylvania, West Virginia or Ohio, with all three states battling it out.
Ohio is competing with Pennsylvania and West Virginia for a multibillion-dollar chemical plant that would process material from the Utica and Marcellus shales.
According to the American Chemistry Council, the cracker would generate 17,000 jobs in Ohio in chemical and supply industries and $7.5 billion in chemical industry output, plus $1 billion in wages and $169 million in state tax revenue.
Crackers turn the byproducts of drilling into constituent parts and process them for useful products. The crackers turn ethane into ethylene, a common plastic feedstock used in products ranging from plastic packaging to grocery bags.
Ethane is one of the products being found in drilling in eastern Ohio and surrounding states. The drilling is also finding natural gas, oil and other so-called wet liquids: propane and butane.
Ethane is difficult to transport and is typically cracked or processed close to where it was drilled.
Difficult to transport, but not impossible. Especially if you have massive quantities. The above cracker would use
.... 60,000 to 80,000 42-gallon barrels of ethane a day and produce 1 million tons of ethylene annually.
But the existing US petrochemical industry is based in Texas. Given plants create 10,000 construction jobs to create them, it still makes sense to build a pipeline from Pennsylvania to Texas. It's difficult to move ethane, but moving the bulk of petrochemical plants is harder, so it's best to move the ethane: out of left field, that's happening:
Enterprise Products Partners LP, the largest U.S. pipeline partnership by market value, will build a 1,230-mile (1,979-kilometer) line to ship ethane from Pennsylvania to U.S. Gulf Coast petrochemical plants.
The ATEX Express pipeline will have the capacity to transport as much as 190,000 barrels a day.
And before someone starts saying shale Ponzi:
“The willingness of shippers to commit to a term of at least 15 years reflects the long-term potential of shale development in the Appalachian region,
But the story gets even better;
Processing ethane into chemicals is 50% cheaper than using crude oil-derived naptha and its availability has made U.S. petrochemical companies the envy of overseas competitors. It also brings the prospect of lower prices for auto parts, Styrofoam and other products.
Shale ripples through the economy as mega trend for the rest of the economy.
Next mega trend: Could the US disconnect from the rest of the world as global growth engine based on job creation in manufacturing? That story is six to twelve months away. Who would ever have seen that coming?
