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Hurricane Harvey – Another Good Reason for Northeast Petrochemical Expansion

  Fall 2017

Hurricane Harvey – Another Good Reason for Northeast Petrochemical Expansion
By: Greg Kozera- Shale Crescent USA

 

We have all seen the pictures of devastation from Hurricane Harvey in Houston and the Gulf Coast. I have seen three feet of snow. It is hard for me to imagine three to four feet of rain which is far more damaging. I saw first-hand the destructive power of flood water at Elkview and Clendenin, WV last summer. Over a year has passed since that flood and those communities and people are still recovering. Harvey has impacted millions of people. They have a long tough road ahead and will need help and support for months. We are Americans and we will get through this together.

Although Harvey will have an impact on the entire country, the world has changed a lot since Hurricane Katrina in 2005. Then we were dependent on foreign sources for our oil. In 2005 my local gasoline station raised gasoline $0.25/ gallon literally overnight. This year our local gasoline prices went down over the weekend when Harvey hit Texas. We have local refineries that are making gasoline out of the liquids from the Marcellus and Utica. Gasoline prices may ultimately increase because of the refineries that have had to shut down on the Gulf Coast but I doubt that we will see the kind of price increases we saw in 2005.

In 2005 our domestic natural gas supply was limited and the northeast was dependent on pipelines from the Gulf Coast for most of its gas. Today the northeast is shipping natural gas in four directions out of the region including south to the Gulf Coast. Consumers should not expect increased natural gas prices because of Harvey like we did from Katrina in 2005.

For over 75 years if you wanted to build or expand a petrochemical facility in the United States you wouldn’t be wrong if you located it on the Gulf Coast. The main reasons were access to cheap, abundant energy and petroleum feedstocks the building blocks of petrochemicals. Access to world markets through Gulf Coast ports was another good reason.

That conventional wisdom is getting challenged today. The northeast USA that is being called, “The Shale Crescent”, now has the cheapest most abundant natural gas in the industrialized world because of the Marcellus and Utica shales. If eastern Ohio, southwestern Pennsylvania and northern West Virginia were a country they would be the third largest natural gas producer in the world. This region produced 5% of US natural gas in 2010. Today that number is in excess of 30% and by 2020 the northeast will be producing 35% of US natural gas supply.

Currently natural gas liquids (NGLs), primarily ethane, propane and butane are being shipped via pipeline to Marcus Hook, PA for shipment to Europe. Eastern Canada and the Gulf Coast are served via other pipelines. A recent study said that despite these shipments out of the region the northeast still had enough NGLs to supply at least 5 ethane crackers. This is important because ethane comes from natural gas that is priced domestically, currently at $18 per BOE. Most crackers around the world use naphtha from crude oil that is priced globally, currently around $50 per barrel. This gives the Shale Crescent a big cost advantage.

Shell is currently the only company building a cracker in the northeast. That could change as companies begin to realize the advantages the Shale Crescent has. In addition to cheap abundant energy and feedstocks the Shale Crescent also offers; proximity to 50% of the US and Canadian markets, abundant fresh water like the Ohio River and an experienced petrochemical and construction workforce, with training programs. Ohio ranks #1 in US Plastics Manufacturing employment. The Shale Crescent region also has good rail and river access to ocean ports.

Because of Hurricane Harvey currently 70% of the Gulf Coast petrochemical capacity is shutdown. This could hurt Ohio which has a major Plastics Manufacturing industry and gets most of their feedstock for products from the Gulf Coast. It could impact consumers everywhere with higher prices.

Hurricane Harvey pointed out another advantage for the northeast. The Shale Crescent doesn’t get hurricanes like the Gulf Coast where refineries and petrochemical plants are being shut down because of the storm. It makes sense for the USA to diversify petrochemical production so that a major hurricane can’t seriously damage or shut it down. The best place we believe for this to happen is the Shale Crescent.

Shale Crescent USA, the organization, was formed almost two years ago by a group of successful business and community leaders in Marietta, Ohio and Parkersburg, West Virginia. They realized that natural gas was leaving Ohio and West Virginia instead of being used to create high wage manufacturing and petrochemical jobs. They decided to do something about it so they formed Shale Crescent USA, a nonprofit, non-governmental organization to brand the region and promote the MidOhio Valley. Their vision is to enhance the quality of life and standard of living for the people of the Mid- Ohio Valley by encouraging manufacturers to come and use the cheapest and most abundant natural gas in the industrialized world. The petrochemical industry was born in the early 1920s by Union Carbide near Charleston, WV. That changed the world and brought the petrochemical industry to the Kanawha Valley and the Mid-Ohio Valley. The world has changed again. Abundant energy and feed stocks, water for processing and transportation, proximity to markets, an experienced work force all make it time for industry to take another look at this forgotten part of the country and consider return.

Greg Kozera is the Director of Marketing for Shale Crescent USA www. shalecrescentusa.com . He has over 40 years of experience in the energy industry. Greg is a leadership expert with a Masters in Environmental Engineering and the author of four books and numerous published articles.

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