VIP Shipper Club library – Cracking Gas Construction

ISSUE 2 / 2017

ISSUE 2 / 2017

CRACKING GAS CONSTRUCTION

Benefits of Shell’s Monster Pennsylvania Project

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regional review

CRACKING GAS CONSTRUCTION Benefits of Shell’s Monster Pennsylvania Project

BY ALAN M. FIELD

Early stage of work on Shell’s ethane cracker project in Potter Township (Beaver County), Pennsylvania.

Credit: Pittsburgh Regional Alliance; Larry Rippel, photographer

86 BREAKBULK MAGAZINE www.breakbulk.com

ISSUE 2 / 2017

W

hen it comes online – early in the next decade – the massive ethane cracker under construction by Shell in Potter Township, near Beaver, Pa., will produce 1.6 million tonnes of polyethylene pellets per year. The first such cracker in the region, in its production phase it will support varied project cargoes, while on completion it will provide a major boost to the economy of the Greater Pittsburgh region.

“Game-changer” is the word often used to describe the project,

said Patty Horvatich, vice president, business investment, at the Pittsburgh Regional Alliance. But it will take four to five more years to complete construction of the Shell project.

Horvatich said that, “at its peak, the construction phase of the project will provide jobs for up to 6,000 workers, with full-time employment of 600 expected to operate the facility once it’s online. Engineering, procurement and construction companies think in terms of man-hours, [and] that’s a lot of man-hours.”

www.breakbulk.com BREAKBULK MAGAZINE 87

regional review

IN FIGURES »

5,367 to 6,776

»

US$8.9 to US$11.4 billion

»

US$2.8 billion to US$3.3 billion

»

US$17.3 billion to US$22 billion

»

US$738 million to US$892 million

»

360 to 450

»

4,830 to 6,098

»

US$361 million to US$463 million

New jobs generated statewide post-construction phase Total labor income over the assumed 40-year operation period Value add in the region in the construction phase

Projection of total Pennsylvania value added from ongoing operations Projected total regional labor income for the construction phase Jobs generated for workers residing within the region, starting in 2020 Estimated total regional jobs Projection of ongoing annual labor income Source: Robert Morris School of Business

88 BREAKBULK MAGAZINE www.breakbulk.com

The impact on employment won’t deals are in manufacturing, energy, be limited to additional construction financial services, all of which are jobs. “There are construction jobs, described as legacy strengths of the but then there’s the whole supply region.” chain,” said Horvatich. The PittsThe region enjoyed a big upswing burgh Regional Alliance has visited in inward energy-related investment other crackers on the Gulf Coast – in from 2010 to 2012, in concert with the Louisiana and Texas – and has talked so-called “Shale Gale.” That led to a to companies and firms bidding to be large amount of upstream investment part of the supply chain. It’s also talkand the companies that wanted and ing to those further downstream – the needed to be there put down roots. compounders and converters and the “Their big investments carried companies that will handle the pelus through the Great Recession in lets and transport them. “In terms of a way that allowed our economy to the work shed and the supply chain, fare well. With the recent downturn this is a very big deal, and the decline in and it’s going to be a energy, we have seen tri-state effort,” Hora drop off. But again, “While vatich said. not extreme highs predictability However, comor lows. While premay not be mon with the U.S. dictability may not Gulf Coast, Pittsbe exciting on the exciting on the burgh does have a surface, it is one of surface, it is one the enduring assets shortage of certain skills, such as weldof the enduring of this region,” Cynar ers, and people with said. assets of this commercial driver’s The American region.” licenses.

Chemistry Council “But what we keeps a running tally – Phil Cynar, Pittsburgh don’t have is a shortof how much petRegional Alliance age of collaboration rochemical-related – which is a way investment is being of doing business for us – whereby planned. Right now, seven ethane industry is working in concert with crackers are under construction in the community colleges, ‘vo-tech’ the U.S., with Shell’s Potter Town(vocational technology) schools and ship, Pa., facility being one of them.

CTEs (career technical education) to “Industry experts are saying that get that workforce ready so that we our region alone can support four can meet the demand associated with crackers, in addition to the Shell the Shell project, as well as other cracker,” Horvatich said. Right now, projects underway, in tandem, with it a final investment decision is being in the region,” Horvatich said. awaited from PTT, the Thailandbased global chemical company, MORE TO COME concerning a second cracker in Despite any worker-related chalnearby Dilles Bottom, Ohio. lenges, it’s unlikely that Shell’s mega “This current – and anticipated cracker will be the last large-scale – petrochemical investment activity development in the region – good means that the greater region needs news for project cargo movers. to be ready to welcome and be supPhil Cynar, senior communicaportive, and I believe that we’ll be tions specialist, Pittsburgh Regional ready.” Horvatich said.

Alliance, noted that the region is viewed by corporate investors HURDLES TO OVERCOME as “steady and predictable.” He However, a stumbling block for explained: “We haven’t seen extreme future oil and gas related projects highs or lows. Typically, we are in the region is that its hilly geogaround 275 to 300 [economic develraphy means that there is a lack of opment] deals a year.” Many of the shovel-ready sites. Responding to ISSUE 2 / 2017

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regional review

this, the region has launched a strategic site development fund to provide private mortgage loans to land owners and developers seeking funds to get critical infrastructure – water, sewer and gas lines and roads – in place at their sites.

Cynar added that the Power of 32 Site Development Fund also gives priority consideration for loans to brownfield sites – which the region has a lot of – because these sites, in many cases, are ideal for large industrial operations.

On the policy side, there is a greater role for the private sector, particularly through public-private partnerships, or P3s. These contractual agreements formed between a public agency and a private sector entity allow for greater private sector participation in the delivery and financing of transportation and infrastructure projects.

Matt Smith, president of the Pittsburgh Chamber of Commerce, said: “I think you are going to see some focus in this area on both the state and federal 90 BREAKBULK MAGAZINE www.breakbulk.com

An overview of Shell Pennsylvania Chemical’s 1,300 assembled acres in Potter Township (Beaver County), Pa. where a world-scale petrochemical facility will be constructed between late 2017 and 2020 and brought online early in the next decade.

Credit: Pittsburgh Regional Alliance; Larry Rippel, photographer

levels. We’ve got a pretty robust program for P3s in Pennsylvania, particularly as they relate to some of the transportation infrastructure funding. But at the federal level, in addition to the critical need for robust direct public investment, I think you are going to see that as the new administration rolls out its infrastructure plan, there could be more of a demand for the private sector, through P3s and other mechanisms, to come up with some of that infrastructure funding.”

The Chamber of Commerce has a role to play in advocating at the state and fed-

eral level for infrastructure priorities, for example, lock and dam funding, which is critical to the region’s economy and the quality of life in the region, he said.

Smith added that water and rail are critical transportation infrastructure for the region’s project cargo moves. Despite not being a deepwater port, Pittsburgh, with its unique geographical position, at the confluence of three rivers – the Allegheny, Monongahela and Ohio – makes it feasible to ship project cargoes by water all the way down the Ohio and Mississippi rivers to the Gulf Coast, an important transportation artery for many industries – for both shipping and receiving. BB International news correspondent Alan M. Field has reported on trade, logistics and related technologies from numerous countries in North America, Latin America and East Asia (Japan, Taiwan and Korea) over the past two decades.

ISSUE 2 / 2017