Bayer Pitches Ethylene Plant Atop Shale-Gas Deposits
Bayer AG, the world’s largest maker of polyurethane, is trying to persuade potential investors to build a chemical plant on company sites in West Virginia using ethane from adjacent shale-gas deposits.
The Leverkusen, Germany-based company is in talks to lease or sell unused parts of two sites covering 1,460 acres (590 hectares) for construction of a plant known as a cracker, Bryan Iams, a spokesman for Bayer in Pittsburgh, said today in a telephone interview. The cracker would convert ethane into ethylene, a key ingredient in plastics such as polyethylene.
The Bayer properties sit atop the Marcellus Shale formation, which according to Energy Department estimates is the largest known U.S. gas field. New drilling techniques are boosting production from shale formations, keeping U.S. prices of natural-gas low relative to oil. That’s prompted U.S. chemical makers Dow Chemical Co., Eastman Chemical Co. and Chevron Phillips Chemical Co. to use more gas as a raw material.
Chevron Phillips received preliminary approval last month from Texas regulators to reopen a cracker shut in 2008 at its Sweeny complex, according to a filing on the Texas Commission on Environmental Quality’s website. Eastman is opening a mothballed cracker in Longview, Texas, because it says low-cost gas has made the U.S. more competitive. Dow plans to use 30 percent more ethane, a component of natural gas, at its Gulf crackers.
“The burning question is what to do with all the ethane coming out of the Marcellus Shale,” John Schirra, a senior account manager at U.S. chemical maker Ashland Inc., said in a telephone interview.
No Crackers
The Marcellus formation in western Pennsylvania and northern West Virginia is unusually rich in natural-gas liquids including ethane, said Dennis Yablonsky, chief executive officer of the Allegheny Conference, a Pittsburgh-based economic development group. The region has no crackers, he said.
“We are unabashedly trying to attract” the chemical industry, Yablonsky said in a telephone interview. “We have had positive feedback that the general premise does make sense.”
Proposals for getting Marcellus gas to the chemical industry now involve piping it to crackers on the U.S. Gulf Coast, where the country’s chemical industry in concentrated.
Pittsburgh Chemical Day, an annual conference that brings together companies such as Bayer, Eastman and PPG Industries Inc., will focus its May 10 event on using Marcellus Shale gas to bolster investment in the regional chemical industry, said Schirra, an organizer of the meeting.
Bayer’s sites in New Martinsville and Institute, West Virginia, have access to rail, water and road transportation, Iams said. An ethylene plant adjacent to Bayer’s West Virginia plastics or pesticide plants would cut its raw-materials costs and draw more manufacturers to the area, he said.
It would cost at least $500 million and require about 4 years to build an ethane cracker capable of producing 1 million metric tons of ethylene a year, Hassan Ahmed, a New York-based analyst at Alembic Global Advisors, said in a telephone interview.
To contact the reporter on this story: Jack Kaskey in New York at jkaskey@bloomberg.net
To contact the editor responsible for this story: Simon Casey at scasey4@bloomberg.net
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