11.10.15
Several factors – including the phenomenal, enduring growth in natural gas liquids (NGLs) production from the U.S. shale plays and significant pipeline capacity additions – have combined to make redevelopment of the Marcus Hook Industrial Complex (MHIC) in Delaware County, Pa. more favorable, says a report issued today by IHS Inc.
Other key factors that have become plusses for redevelopment of the Marcus Hook Industrial Complex also include the site’s proximity to major markets and the value of ethane as feedstock for European and Asian petrochemical producers, IHS said.
According to the Marcus Hook Industrial Complex Reuse Study: Update 2015, A Regional Analysis from IHS (NYSE: IHS) -- the leading global source of critical information and insight -- a number of factors have become more favorable for redevelopment of the MHIC in terms of the market, logistics, energy resource supply, and ongoing site improvements being made at MHIC since IHS conducted its initial reuse assessment three years ago.
“Some of the initial recommendations we at IHS made in 2012 for the Marcus Hook Industrial Complex, such as its use as an export facility for natural gas liquids, are even more significant now due to the incredible productivity of the U.S. shale plays, and in particular, the volumes of natural gas liquids coming out of the nearby Marcellus and Utica formations,” said Kevin Lindemer, managing director, downstream consulting for IHS, and a study author. “That bounty, combined with the impact of considerable new pipeline infrastructure, attractive ethane prices, and the site’s closer geographic proximity to major markets, make the U.S. ethane production accessible and cost-competitive for European and some Asian petrochemical producers.”
These low-cost, shale-gas feedstocks have given the U.S. a competitive edge in chemical derivative markets that use NGLS as a feedstock, IHS said, and have expanded downstream opportunities for the MHIC, including enhancing its viability for ethane cracking and derivatives operations.
Furthermore, ongoing site improvements are enabling more efficient land-use at MHIC, which increases the scale of reuse options that were limited (in capacity) in 2012 by the lack of usable space at the site. In addition, the IHS report stated that the high capacity of on-site infrastructure can accommodate most re-use options, and sufficient capacity of public utilities (e.g., water, wastewater, electric power) also exist onsite to accommodate increases in demand from the proposed reuses.
In its original assessment, IHS examined seven potential reuse options for the Marcus Hook facility, five of which were energy-based options: 1) Natural gas liquids processing and fractionation facility; 2) Gas-to-liquids (GTL) production and storage facility; 3) Liquid natural gas liquefaction and export terminal; 4) Refined petroleum products and NGLs terminal; 5) Natural gas-driven power generation, as well as two Marcellus shale chemical-based options: 1) Ethane cracking and derivatives; and 2) Propane dehydrogenation (PDH). Three of the 2012 reuses with high market viability – a PDH plant, a NGLs fractionation facility, and a NGLs export terminal - are currently being pursued at the MHIC.
In just three years since the initial IHS reuse study was done, MHIC has attracted millions of dollars in new capital investment. In response to the development interest in Marcus Hook, Sunoco Logistics (SXL) has made, and continues to make, major enhancements to the site, which in turn, is creating new opportunities for industrial development in the area.
”For chemicals development options, we continue to recommend a propane dehydrogenation plant and an ethane cracker for the site, which were assigned a market viability rating of high and medium, respectively, in 2012, and again in the updated study,” said Anthony Palmer, senior director of chemical consulting at IHS, and an author of the IHS report.
The higher than anticipated growth in the volume of NGLs being produced in the Marcellus shale formation is, in turn, driving the substantial increase in the volume of NGLs that will flow to MHIC via the Mariner East pipeline projects. These factors increase the potential for exports of natural gas liquids, the report said.
In 2015, IHS continues to recommend the construction of a propane dehydrogenation plant to make propylene for Braskem’s existing polypropylene plant at the Marcus Hook site, using shale-based propane from Marcellus shale. Propylene supply limitations have constrained regional demand growth, driving propylene prices up. IHS forecasts that global polypropylene demand growth is expected to average 4.9 percent during the next five years. The current market viability of a PDH plant at the MHIC is high, the IHS report said, the same as in 2012 study. IHS estimates that a proposed PDH plant could have an annual capacity of up to 400,000 metric tons if most of its output is sent to the adjacent Braskem polypropylene plant. While a PDH plant is currently in the works at the site, if Sunoco Logistics is able to find other customers for the propylene, IHS noted, the capacity of the PDH facility could be substantially higher.
“The redevelopment of Marcus Hook Industrial Complex represents a rebirth for the site, but more importantly, it represents renewed economic opportunities for the community and the generations of families who have relied on Marcus Hook for their livelihoods,” said John McBlain, Delaware County Councilman. “The ongoing investment and development in the MHIC and adjacent sections of the County’s Delaware River shoreline today are fueling the revival of Delaware County as a dynamic, global energy hub. Marcus Hook is a great example of the economic success that can be achieved when community, county, and regional leaders work with industry leaders and investors to develop a strategic, viable path forward for these critical industrial sites.”
The MHIC is located in close proximity to, and is connected to, a number of other related chemical and energy facilities along the Delaware River, and so it is well suited, the IHS report noted, to serve as the center of a regional petrochemical complex, enabling compatible development to occur at these other sites as well.
In terms of logistics, the MHIC site has excellent transportation accessibility as it sits on the river, is served by rail, located only a few miles from an interchange on I-95, and it is close to operating oil and natural gas pipelines, IHS study said. The completion of Mariner East 1 pipeline has the capacity to deliver 70,000 barrels per day (bpd) of ethane and propane from the Marcellus, IHS said, and the next phases involving two new pipelines could increase the supply of NGLS available at MHIC to as much as 750,000 bpd.
IHS noted that the MHIC is significantly closer to European, South American, and Southern and East Asian markets for NGLs than are the major exports terminals located along the U.S. Gulf Coast (USGC) (combined pipeline and marine distances). Shorter transport distances generally mean less cost and quicker delivery times for importers of these products.
In addition, the IHS report said the site offers multiple berthing locations in the dock. Once the Delaware River and the turning basin off the MHIC are deepened to 45 feet by 2017, the MHIC will be able to accommodate Very Large Crude Carriers (VLCCs) that have been lightened to 45’ and Very Large Gas Carriers (VLGCs). This, in turn, enhances export options for chemical derivatives in the short term, and oil and gas in the longer term, IHS said.
“Since 2012, we’ve seen one Mariner East pipeline completed and a second is planned,” Lindemer said. “This creates tremendous opportunity to move gas liquids to Marcus Hook for export to Europe and Asia. Marcus Hook has a logistics advantage in terms of distance, relative to liquids exports coming from the USGC. As one of the few facilities of its type in the northeastern United States, MHIC is uniquely positioned to process and distribute hydrocarbons and chemical derivatives competitively to the underserved northeastern market and global markets.”
European-based petrochemical producer INEOS, for example, has already taken steps to leverage this advantage. Its twin fleet of specialized tankers will begin shipping ethane from Marcus Hook to its refineries in Norway and Scotland later this year. As a result, the economic benefit is fueling a dual rebirth, not only for the communities around Marcus Hook, but also the recently threatened–with-closure refinery town Grangemouth, Scotland’s largest industrial complex, which will now be on the receiving end of the Marcus Hook exports. John McNally, CEO of INEOS Olefins and Polymers UK, was quoted last week as saying that the shale-gas imports coming from the U.S. and Marcus Hook were “’the survival plan’” for saving Grangemouth chemicals.
Much like the U.S. petrochemical industry, which has been revived by the nation’s bounty of shale-derived feedstocks, the MHIC and its adjacent assets have emerged as symbols of economic promise and industrial revitalization made possible by the U.S. energy renaissance. Just four years ago, the Sunoco’s Marcus Hook Refinery, in operation since 1902 and one of the nation’s oldest oil refineries, was closed.
When operational, the refinery, which sat on a 780-acre site on the banks of the Delaware River south of Philadelphia, processed 175,000 barrels per day of crude oil into a wide range of petroleum and petrochemical products and was responsible for nearly 500 direct jobs in Delaware County, Pa. The closure threatened the loss of jobs and one of the region’s major economic engines, but the U.S. shale boom delivered several reuse options that would not have been possible without it, IHS said.
Total employment figures for the recommended reuses include both full-time employees operating personnel and contract workers, IHS noted. The sum of reuse employment and current levels of employment at the MHIC could result in total employment at the site that will approach the level that existed when the refinery was operating at full capacity. The fully-developed MHIC will have employment that is distributed across different types of activities, improving resiliency to changes in market conditions compared to when refining was the dominant activity there.
Finally, the IHS report said MHIC’s likely role as the central component in a world-class petrochemical complex along the Delaware River, including potential marine and rail transport activities, will enable the creation of a large number of additional direct jobs throughout the Greater Philadelphia Region, with the bulk of the direct jobs likely located in or close to Delaware County. An ethane cracker, however, is an important component for long-term economic development of an integrated petrochemical production complex along the Delaware River, both within and outside of Delaware County.
“The difference between 2012 and 2015 for the Marcus Hook site is pretty stark,” said Phil Hopkins, director of economics consulting at IHS. “Three years ago, the MHIC faced two possible futures–survival or closure. Today, it would be fair to say that the Marcus Hook Industrial Complex has been revived by Marcellus and Utica shale—and through the cooperative efforts of government, industry and the local community. In 2015, thanks largely to an influx of new infrastructure investment, increasingly supported by the rapidly growing flow of NGLs, numerous opportunities exist for the industrial site, but they come with complex choices. These choices require deeper investigation of the options to evaluate the potential return on capital to investors and to maximize the future economic benefits to Delaware County and the region.”
While there is an immediate demand for additional quantities of propylene to supply Braskem’s polypropylene operations at the site, IHS said expanding the propylene supply in the Philadelphia area offers the potential for investment to produce other propylene derivatives that have synergies with the area’s refining operations, most notably cumene, which is used by Honeywell at its phenol production facility in the area. Similarly, the ethane cracker would be accompanied by downstream derivatives, such as polyethylene, which have large, regional markets nearby, and have the potential to spur additional investment in the plastic converting industry.
“For MHIC investors and community planners,” Palmer said, “having such multiple, complex options are good problems to have. They are happy to have viable, positive choices focused on growth and expansion—not shut-downs and closures, which is a vastly different story than a few years ago.”
For the 2015 updated study, IHS built on the approach employed in the 2012 analysis, and re-assessed the viability and requirements of re-use options. The analysis integrates evolving economic, energy and chemical market dynamics that shape the viability of each option. IHS employed experts from its economics, energy, chemical and transportation teams to update and characterize the re-use potential of various options as well as the advantages and challenges of the MHIC site and surrounding assets and attributes.
In terms of challenges, the IHS report noted, a few key disadvantages exist for the MHIC, with the most critical likely to be the fact that the site competes with investment alternatives closer to the Marcellus field (thereby reducing the cost for delivered ethane and propane) or near the large, established petrochemical industry on the USGC. In addition, the MHIC site has no access, other than by rail, to discounted mid-continent crude oil, IHS said. And in terms of rail usage, the facility has just a four-hour window of rail access that limits when unit trains can deliver commodities to industrial facilities along the County’s Delaware waterfront. The capacity of the nearby Stony Creek rail yard is maxed out, the report noted.
In addition, IHS warned that the I-95 corridor, while it is a major interstate connector with the capacity to accommodate additional truck traffic to deliver new freight to markets, is challenged by congestion and needed road maintenance, and will require route management to optimize its expanded use.
IHS was commissioned to conduct both the initial (2012) and updated (2015) independent studies by the Delaware County Council, which appropriated funds and directed the Industrial Development Authority to undertake the study. The purpose was to identify potential redevelopment concepts that could best utilize the site’s assets to maintain employment levels and perpetuate a sustainable local economy in Delaware County and the East Coast region. Since then, the study has served as a ‘national model’ for other industrial sites seeking to find a second economic life.
To speak with Kevin Lindemer, Anthony Palmer or Phil Hopkins, please contact Melissa Manning at melissa.manning@ihs.com. The complete Marcus Hook Industrial Complex Reuse Study: Update 2015, A Regional Analysis and also the Executive Summary can be found online: http://www.co.delaware.pa.us/.
Other key factors that have become plusses for redevelopment of the Marcus Hook Industrial Complex also include the site’s proximity to major markets and the value of ethane as feedstock for European and Asian petrochemical producers, IHS said.
According to the Marcus Hook Industrial Complex Reuse Study: Update 2015, A Regional Analysis from IHS (NYSE: IHS) -- the leading global source of critical information and insight -- a number of factors have become more favorable for redevelopment of the MHIC in terms of the market, logistics, energy resource supply, and ongoing site improvements being made at MHIC since IHS conducted its initial reuse assessment three years ago.
“Some of the initial recommendations we at IHS made in 2012 for the Marcus Hook Industrial Complex, such as its use as an export facility for natural gas liquids, are even more significant now due to the incredible productivity of the U.S. shale plays, and in particular, the volumes of natural gas liquids coming out of the nearby Marcellus and Utica formations,” said Kevin Lindemer, managing director, downstream consulting for IHS, and a study author. “That bounty, combined with the impact of considerable new pipeline infrastructure, attractive ethane prices, and the site’s closer geographic proximity to major markets, make the U.S. ethane production accessible and cost-competitive for European and some Asian petrochemical producers.”
These low-cost, shale-gas feedstocks have given the U.S. a competitive edge in chemical derivative markets that use NGLS as a feedstock, IHS said, and have expanded downstream opportunities for the MHIC, including enhancing its viability for ethane cracking and derivatives operations.
Furthermore, ongoing site improvements are enabling more efficient land-use at MHIC, which increases the scale of reuse options that were limited (in capacity) in 2012 by the lack of usable space at the site. In addition, the IHS report stated that the high capacity of on-site infrastructure can accommodate most re-use options, and sufficient capacity of public utilities (e.g., water, wastewater, electric power) also exist onsite to accommodate increases in demand from the proposed reuses.
In its original assessment, IHS examined seven potential reuse options for the Marcus Hook facility, five of which were energy-based options: 1) Natural gas liquids processing and fractionation facility; 2) Gas-to-liquids (GTL) production and storage facility; 3) Liquid natural gas liquefaction and export terminal; 4) Refined petroleum products and NGLs terminal; 5) Natural gas-driven power generation, as well as two Marcellus shale chemical-based options: 1) Ethane cracking and derivatives; and 2) Propane dehydrogenation (PDH). Three of the 2012 reuses with high market viability – a PDH plant, a NGLs fractionation facility, and a NGLs export terminal - are currently being pursued at the MHIC.
In just three years since the initial IHS reuse study was done, MHIC has attracted millions of dollars in new capital investment. In response to the development interest in Marcus Hook, Sunoco Logistics (SXL) has made, and continues to make, major enhancements to the site, which in turn, is creating new opportunities for industrial development in the area.
”For chemicals development options, we continue to recommend a propane dehydrogenation plant and an ethane cracker for the site, which were assigned a market viability rating of high and medium, respectively, in 2012, and again in the updated study,” said Anthony Palmer, senior director of chemical consulting at IHS, and an author of the IHS report.
The higher than anticipated growth in the volume of NGLs being produced in the Marcellus shale formation is, in turn, driving the substantial increase in the volume of NGLs that will flow to MHIC via the Mariner East pipeline projects. These factors increase the potential for exports of natural gas liquids, the report said.
In 2015, IHS continues to recommend the construction of a propane dehydrogenation plant to make propylene for Braskem’s existing polypropylene plant at the Marcus Hook site, using shale-based propane from Marcellus shale. Propylene supply limitations have constrained regional demand growth, driving propylene prices up. IHS forecasts that global polypropylene demand growth is expected to average 4.9 percent during the next five years. The current market viability of a PDH plant at the MHIC is high, the IHS report said, the same as in 2012 study. IHS estimates that a proposed PDH plant could have an annual capacity of up to 400,000 metric tons if most of its output is sent to the adjacent Braskem polypropylene plant. While a PDH plant is currently in the works at the site, if Sunoco Logistics is able to find other customers for the propylene, IHS noted, the capacity of the PDH facility could be substantially higher.
“The redevelopment of Marcus Hook Industrial Complex represents a rebirth for the site, but more importantly, it represents renewed economic opportunities for the community and the generations of families who have relied on Marcus Hook for their livelihoods,” said John McBlain, Delaware County Councilman. “The ongoing investment and development in the MHIC and adjacent sections of the County’s Delaware River shoreline today are fueling the revival of Delaware County as a dynamic, global energy hub. Marcus Hook is a great example of the economic success that can be achieved when community, county, and regional leaders work with industry leaders and investors to develop a strategic, viable path forward for these critical industrial sites.”
The MHIC is located in close proximity to, and is connected to, a number of other related chemical and energy facilities along the Delaware River, and so it is well suited, the IHS report noted, to serve as the center of a regional petrochemical complex, enabling compatible development to occur at these other sites as well.
In terms of logistics, the MHIC site has excellent transportation accessibility as it sits on the river, is served by rail, located only a few miles from an interchange on I-95, and it is close to operating oil and natural gas pipelines, IHS study said. The completion of Mariner East 1 pipeline has the capacity to deliver 70,000 barrels per day (bpd) of ethane and propane from the Marcellus, IHS said, and the next phases involving two new pipelines could increase the supply of NGLS available at MHIC to as much as 750,000 bpd.
IHS noted that the MHIC is significantly closer to European, South American, and Southern and East Asian markets for NGLs than are the major exports terminals located along the U.S. Gulf Coast (USGC) (combined pipeline and marine distances). Shorter transport distances generally mean less cost and quicker delivery times for importers of these products.
In addition, the IHS report said the site offers multiple berthing locations in the dock. Once the Delaware River and the turning basin off the MHIC are deepened to 45 feet by 2017, the MHIC will be able to accommodate Very Large Crude Carriers (VLCCs) that have been lightened to 45’ and Very Large Gas Carriers (VLGCs). This, in turn, enhances export options for chemical derivatives in the short term, and oil and gas in the longer term, IHS said.
“Since 2012, we’ve seen one Mariner East pipeline completed and a second is planned,” Lindemer said. “This creates tremendous opportunity to move gas liquids to Marcus Hook for export to Europe and Asia. Marcus Hook has a logistics advantage in terms of distance, relative to liquids exports coming from the USGC. As one of the few facilities of its type in the northeastern United States, MHIC is uniquely positioned to process and distribute hydrocarbons and chemical derivatives competitively to the underserved northeastern market and global markets.”
European-based petrochemical producer INEOS, for example, has already taken steps to leverage this advantage. Its twin fleet of specialized tankers will begin shipping ethane from Marcus Hook to its refineries in Norway and Scotland later this year. As a result, the economic benefit is fueling a dual rebirth, not only for the communities around Marcus Hook, but also the recently threatened–with-closure refinery town Grangemouth, Scotland’s largest industrial complex, which will now be on the receiving end of the Marcus Hook exports. John McNally, CEO of INEOS Olefins and Polymers UK, was quoted last week as saying that the shale-gas imports coming from the U.S. and Marcus Hook were “’the survival plan’” for saving Grangemouth chemicals.
Much like the U.S. petrochemical industry, which has been revived by the nation’s bounty of shale-derived feedstocks, the MHIC and its adjacent assets have emerged as symbols of economic promise and industrial revitalization made possible by the U.S. energy renaissance. Just four years ago, the Sunoco’s Marcus Hook Refinery, in operation since 1902 and one of the nation’s oldest oil refineries, was closed.
When operational, the refinery, which sat on a 780-acre site on the banks of the Delaware River south of Philadelphia, processed 175,000 barrels per day of crude oil into a wide range of petroleum and petrochemical products and was responsible for nearly 500 direct jobs in Delaware County, Pa. The closure threatened the loss of jobs and one of the region’s major economic engines, but the U.S. shale boom delivered several reuse options that would not have been possible without it, IHS said.
Total employment figures for the recommended reuses include both full-time employees operating personnel and contract workers, IHS noted. The sum of reuse employment and current levels of employment at the MHIC could result in total employment at the site that will approach the level that existed when the refinery was operating at full capacity. The fully-developed MHIC will have employment that is distributed across different types of activities, improving resiliency to changes in market conditions compared to when refining was the dominant activity there.
Finally, the IHS report said MHIC’s likely role as the central component in a world-class petrochemical complex along the Delaware River, including potential marine and rail transport activities, will enable the creation of a large number of additional direct jobs throughout the Greater Philadelphia Region, with the bulk of the direct jobs likely located in or close to Delaware County. An ethane cracker, however, is an important component for long-term economic development of an integrated petrochemical production complex along the Delaware River, both within and outside of Delaware County.
“The difference between 2012 and 2015 for the Marcus Hook site is pretty stark,” said Phil Hopkins, director of economics consulting at IHS. “Three years ago, the MHIC faced two possible futures–survival or closure. Today, it would be fair to say that the Marcus Hook Industrial Complex has been revived by Marcellus and Utica shale—and through the cooperative efforts of government, industry and the local community. In 2015, thanks largely to an influx of new infrastructure investment, increasingly supported by the rapidly growing flow of NGLs, numerous opportunities exist for the industrial site, but they come with complex choices. These choices require deeper investigation of the options to evaluate the potential return on capital to investors and to maximize the future economic benefits to Delaware County and the region.”
While there is an immediate demand for additional quantities of propylene to supply Braskem’s polypropylene operations at the site, IHS said expanding the propylene supply in the Philadelphia area offers the potential for investment to produce other propylene derivatives that have synergies with the area’s refining operations, most notably cumene, which is used by Honeywell at its phenol production facility in the area. Similarly, the ethane cracker would be accompanied by downstream derivatives, such as polyethylene, which have large, regional markets nearby, and have the potential to spur additional investment in the plastic converting industry.
“For MHIC investors and community planners,” Palmer said, “having such multiple, complex options are good problems to have. They are happy to have viable, positive choices focused on growth and expansion—not shut-downs and closures, which is a vastly different story than a few years ago.”
For the 2015 updated study, IHS built on the approach employed in the 2012 analysis, and re-assessed the viability and requirements of re-use options. The analysis integrates evolving economic, energy and chemical market dynamics that shape the viability of each option. IHS employed experts from its economics, energy, chemical and transportation teams to update and characterize the re-use potential of various options as well as the advantages and challenges of the MHIC site and surrounding assets and attributes.
In terms of challenges, the IHS report noted, a few key disadvantages exist for the MHIC, with the most critical likely to be the fact that the site competes with investment alternatives closer to the Marcellus field (thereby reducing the cost for delivered ethane and propane) or near the large, established petrochemical industry on the USGC. In addition, the MHIC site has no access, other than by rail, to discounted mid-continent crude oil, IHS said. And in terms of rail usage, the facility has just a four-hour window of rail access that limits when unit trains can deliver commodities to industrial facilities along the County’s Delaware waterfront. The capacity of the nearby Stony Creek rail yard is maxed out, the report noted.
In addition, IHS warned that the I-95 corridor, while it is a major interstate connector with the capacity to accommodate additional truck traffic to deliver new freight to markets, is challenged by congestion and needed road maintenance, and will require route management to optimize its expanded use.
IHS was commissioned to conduct both the initial (2012) and updated (2015) independent studies by the Delaware County Council, which appropriated funds and directed the Industrial Development Authority to undertake the study. The purpose was to identify potential redevelopment concepts that could best utilize the site’s assets to maintain employment levels and perpetuate a sustainable local economy in Delaware County and the East Coast region. Since then, the study has served as a ‘national model’ for other industrial sites seeking to find a second economic life.
To speak with Kevin Lindemer, Anthony Palmer or Phil Hopkins, please contact Melissa Manning at melissa.manning@ihs.com. The complete Marcus Hook Industrial Complex Reuse Study: Update 2015, A Regional Analysis and also the Executive Summary can be found online: http://www.co.delaware.pa.us/.
