U.S. NGLS PRODUCTION
East
Southwest
Other
7
PROJECTIONS
6
5
4
3
2
1
0
2000
2010
2020
2030
2040
2050
Source: U.S. Energy Information Administration
The Appalachian Basin’s fast-growing supply of NGLs is one reason that, in 2017, Shell Chemical Appalachia – a subsidiary of oil and gas giant Royal Dutch Shell – began constructing the Rust Belt’s first ethylene plant on the Ohio River. This $6 billion facility is about 30 miles northwest of Pittsburgh. It will consume up to 96,000 barrels of ethane per day to churn out 1.6 million metric tons of ethylene per year. But Shell’s reason for building in the Rust Belt region instead of along the Gulf Coast goes beyond just the cheap input costs. As Shell spokesman Ray Fisher told the construction trade publication Engineering News-Record back in November... abundance of [ethane], and proximity to customer base. Seventy-five percent of all the polyethylene demand is within a 700- mile radius of our facility. In other words, the Rust Belt region is also The top two reasons Shell decided on Pennsylvania were proximity and
where many chemical makers are located ... The Department of Energy lists more than 7,500 chemical makers in this region. These companies account for more than $300 billion in annual revenue and employ 900,000 workers. Appalachian Basin chemical makers total nearly a third of all U.S. petrochemical industries – the primary consumers of ethylene. According to a 2018 study from IHS Markit, a hypothetical $3 billion ethylene plant in the Appalachian Basin would lead to hundreds of millions of dollars in additional earnings for chemical plants versus a facility along the Gulf Coast. With lower-cost inputs and closer location to consumers, the region delivered better returns under every scenario. In the base-case scenario, the study showed the Appalachian Basin plant would create a net present value of $700 million in EBITDA (earnings before interest, taxes, depreciation, and amortization) in 2020. A Gulf Coast plant would only bring in $217 million in
American Consequences
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