Department of Energy report supports Appalachian ethane storage hub
MORGANTOWN — The U.S. Department of Energy has outlined the potential benefits of an Appalachian ethane storage hub in a new report to Congress.
The report – “Ethane Storage and Distribution Hub in the United States, commissioned by congress – says the shale oil and gas boom has transformed global energy markets and made the U.S. the largest combined crude oil and gas producer in the world. … The Appalachian Basin’s shale resource endowment is so bountiful that, were it an independent country, the region would be the world’s third largest producer of natural gas today.”
Natural gas liquids, it says, are a valuable component of the shale gas, and ethane in particular plays a vital role in the petrochemical industry – for making plastics and resins.
Ethylene is the most common product derived from ethane and right now, the report says, more than 95 percent of ethylene production is concentrated in Texas and Louisiana. This isn’t so much as national energy security concern as an economic security concern.
In its characteristic bland language, the report says, “The establishment of an ethane storage and distribution hub near production from the Marcellus and Utica plays could provide benefits to the broader petrochemical and plastics industries along the lines of supply diversity. The present day geographic concentration along the Gulf Coast of petrochemical infrastructure and supply may pose a strategic risk, where severe weather events limit the availability of key feedstocks.
“Petrochemical expansion beyond the Gulf Coast would increase geographic diversity,” it continues. “This geographic diversity could provide manufacturers with flexibility and redundancy with regard to where they purchase their feedstock and how it is transported to them. Moreover, this flexibility and redundancy, as well as the overall increase in U.S. feedstock production, could mitigate the potential for any price spikes in petrochemical feedstocks that could be caused by a severe weather or other disruptive event in any one region of the U.S.”
Here is a tour of notable observations form the report. It uses the abbreviations NGL and NGPL for natural gas liquids and NGPL for liquids processed at plants.
The Energy Information Administration projects NGPL production will double from 2017 to 2050, with most coming from the Marcellus/Utica and southwestern Permian play through the next 10 years.
NGLs are stored underground in pressurized caverns. “Storage of NGLs is necessary to balance seasonal supply and demand variations. … Storage is particularly important for ethane crackers that use furnaces and complex processing that are laborious to restart.5 Having ethane feedstock available in storage helps large petrochemical plants ensure continuing operations.”
Several hubs already exist, including three major ones in Mont Belvieu, Texas, Conway, Kansas and Sarnia in Ontario, Canada.
A storage hub is more than just the hole in the ground where the liquids get stuffed. It’s the infrastructure to transport the gas, processing plants to prepare it for storage, cracker plants to turn the ethane into ethylene, and downstream plants to turn the ethylene into plastic products.
Storage hubs can evolve into market hubs – as in Texas and Kansas – where liquids are physically transported and financially traded as commodities.
Here in the Marcellus/Utica, one cracker plant is under way: Shell Chemical’s in Monaca, Pa., northeast of Pittsburgh. Two others are proposed have experienced delays: Odebrecht/Braskem in Wood County and PTT Global/Daelim in Shadyside, Ohio, between Wheeling and Moundsville. The area could support a total of four to six crackers, based on various estimates.
And Appalachia Development Group is developing the actual storage facility. In January, the Department of Energy invited the group to submit a Part II application for loan guarantee for a $1.9 billion loan, which will require securing another $1.4 billion in equity.
Three sites are in view: one in the Northern Panhandle; one spanning portions of north-central West Virginia, southeast Ohio and southwest Pennsylvania; and one in the Kanawha River Valley. The Appalachian Oil and Natural Gas Consortium, housed at WVU, considers the Kanawha site the most promising.
The Appalachian hub’s potential can be seen in the existing chemistry industry’s economic activity inside a 300-mile radius of Pittsburgh as compared to the Gulf Coast. The industry around Pittsburgh produces $308.8 billion in revenue and supports 943,000 jobs, compared to $171.1 billion and 333,000 jobs for the Gulf.
“Growth in the petrochemical industry would also impact other industries, and additional required supporting infrastructure would be needed. For instance, increased electricity demand could require additional power plant capacity; increased truck traffic could impact existing road infrastructure. These impacts could be mitigated to some degree through coordinated planning and infrastructure development.”
People familiar with the report and the process required to bring one here noted that this will largely be a private-sector operation. The government’s role will be in such things as the DOE loan program and in evaluating and approving the many permits that will be required.
Rep. David McKinley, R-W.Va., sent out notice of the report and said, “Natural gas production in the region has grown by leaps and bounds over the past decade. The next logical step is to take full advantage of this resource and develop a petrochemical industry in the region.
“With the vast majority of America’s petrochemical industry located on the Gulf Coast and vulnerable to disruptions by hurricanes, it is in the national interest to diversify and build a secondary hub in West Virginia, Ohio, Pennsylvania, and Kentucky,” he said.
“West Virginia and surrounding states are poised to become a leader in petrochemicals and manufacturing, but we need to build the necessary infrastructure to make it work.” He’s committed to work with DOE Secretary Rick Perry and other stakeholders to make it happen.
Sen. Shelley Moore Capito, R-W.Va., said, “I’ve said time and time again that a regional ethane storage hub would do a lot to benefit West Virginia—like driving economic growth and enabling us to make the most of our natural resources.
“When we began this process, I requested that the Department of Energy explore the effects this kind of project would have in our region, and I was excited to see Secretary Perry and the department release their report this week. The study – the second I requested – further confirms why I have been a strong advocate for this project by highlighting its many benefits, including economic security, growth, and job creation.
“I’m excited about the benefits this could bring to the Mountain State, and I will continue working with Secretary Perry, the Department of Energy, and others to see this project through,” she said.
Sen. Joe Manchin, D-W.Va., said, “I have long supported the environmentally responsible development of a natural gas liquids storage hub that will create good-paying jobs, and I am pleased that the Department of Energy’s report recognizes the benefits of the development of an ethane storage hub in Appalachia. Given the high concentrations of natural gas in our region, I look forward to working with the Department of Energy to examine the potential national security benefits of a hub that can support all natural gas liquids.”
By: David Beard
Source: The Dominion Post
Next Article Previous Article