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Shell set location and tax break for Appalachia Ethane cracker

Shell signed with Horsehead for Pennsylvania site

In March 2012, Shell signed with Horsehead Corp (Horsehead) a land option agreement on a 300 acre site for its $2.5 billion ethane cracker and petrochemical complex.

This Appalachia ethane cracker project is a key milestone in Shell’s strategy to develop an upstreamdownstream integrated business model to benefit from the competitive advantage of the shale gas development.

With the acquisition of East Resources in Pennsylvania, Shell owns 900,000 acre in the Marcellus shale gas field within the Appalachia basin.

Since then Shell is developing the Tioga County in Pennsylvania and is now exploring to the Lawrence and Butler Counties.

Recognized as one of the biggest shale gas field, if not the biggest one, Marcellus lies across several states in USA, from New York State in the north, where shale gas exploration and production is banned, to Pennsylvania, West Virginia, Ohio and Kentucky.

In addition to the natural gas, Shell‘s acreage holds tight gas fields with valuable condensate reserves.

These condensate motivate Shell to develop a petrochemical complex behind the ethane cracker.

When Shell announced its project for an ethane cracker and petrochemical complex, three states, Pennsylvania, West Virginia and Ohio entered in competition to host it.

After evaluating different sites in respect with multiple criteria such as access to natural gas fields, water, road and rail transportation infrastructure, power grids, economics, and sufficient acreage for a world scale petrochemical complex and potential expansions, Shell selected Horsehead‘s site located in Potter and Center Townships in Beaver County near Monaca, Pennsylvania, USA.

Horsehead is a zinc manufacturer actually running a zinc smelter in Potter.

Therefore the Potter site is already equipped will all the necessary infrastructures and power supply for energy intensive industries and heavy duties operations.

The local manpower and services companies are also trained to support large scale facilities.

Horsehead has decided to close the Potter site as building up a new zinc plant in North Carolina.

With its new smelter in North Carolina scheduled to start up in third quarter 2013, Horsehead committed with Shell to leave the Potter site in Beaver County near Monaca, Pennsylvania, USA, in 2014.

Shell to get $1.65 billion tax break from Pennsylvania

In addition to the ethane crackerShell is considering a petrochemical complex producing:

  – Polyethylene (PE)

 – Mono-ethylene glycol (MEG)

 – other polyolefins

As Shell is still working on the feasibility study of this Appalachia ethane cracker, the total scope of the petrochemical complex is not yet defined.

But from the ethane cracker and to its downstream units, Shell estimates the capital expenditure from $2.5 billion to $4 billion.

With Shell Appalachia ethane cracker and related chemical facilities to be developed on the downstream side, the American Chemistry Council considers more than 10,000 jobs to be created in Pennsylvania.

In February 2012, the Pennsylvania law makers passed a bill to expand the tax-free zones for 15 years that could apply to Shell Appalachia ethane cracker and all other chemical companies willing to add facilities in the petrochemical complex.

In June 2012, Pennsylvania Governor Tom Corbett passed a bill for the Sate budget including $1.65 billion tax credit for Shell and its potential partners in the Pennsylvania ethane cracker.

To be eligible to this tax-credit the companies must invest at least $1  billion in capital expenditure and create 2500 construction jobs.

This tax-credit shall apply from 2017 and for the 25 following years as soon as the ethane cracker production exceeds 4.25 million t/y (85,000 b/d) of ethane.

Having selected the location for the Pennsylvania ethane cracker and defined the tax picture, Shell is now looking for the partners such as Range Resources or Consol Energy to share working interest and provide additional shale gas and condensate feedstock.

For more information and data about oil and gas and petrochemical projects go to Project Smart Explorer

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