Shell targets shale, but not in EU

Shell Chemicals is planning to tap into THE enormous potential of shale gas as part of efforts to build on its global production setup, which is centred around major facilities in The Netherlands, Singapore and the US. The focus, though, is likely to be outside of Europe, as the company is doubtful about the prospects for shale in the region.

Ben van Beurden, Shell executive vice president chemicals, explained: “We are not going to compete with pure chemistry companies like BASF, Dow and DuPont, on their terms. We are a chemical engineering company, so we need to be excellent in process technology and in conversion of basic molecules that feed into other people’s value chains.”

All Shell Chemicals’ investments must, therefore, deliver feedstock advantage, said van Beurden, before detailing the company’s plans to build a world-scale ethylene cracker with integrated derivative units in the Appalachian region of the US. This would process ethane from the Marcellus shale gas fields, particularly to produce ethylene mainly as a feedstock for polyethylene, which is in growing demand by northeastern US industries.

Cheaper feedstock

Over recent years, shale gas has come from almost nowhere to now represent around 15% of US gas supply, with growth forecasts for production ranging from 50-200% over the next five years. This has lowered feedstock costs and revived the economics of refining in the US, where Shell already owns and operates four petrochemical crackers at Deer Park, Texas and Norco, Louisiana.

Explaining the investment proposal, van Beurden, said: “A lot of unconventional gas will come on stream in unconventional places, such as Pennsylvania and Ohio. Massive investment would be required to bring ethane down from Pittsburgh say to Houston. With [the cost of] the pipeline you are looking at the feedstock advantage isn’t there any more.”

Building a cracker close to shale gas production would also avoid the logistical issues of having to bring the feedstock down to refineries and then return the products back up North

Another driver for the project is that natural gas companies have to remove natural gas liquids (NGLs) ethane, propane, butane and other compounds from methane to make it ’pipeline-quality’.

At the moment, however, much of the ethane from shale gas is going into the pipeline ’under the radar’ as the system can cope with slightly higher ethane contents. But, said van Beurden, the increasing volumes of ethane from some shale gas fields mean alternative solutions are now needed.

Building a cracker close to shale gas production would also avoid the logistical issues of bringing the feedstock down to refineries in the South and then returning products, such as polyethylene, back up North to the places of highest demand, he added.

Asked about the prospect of developing shale gas resources in Europe, the Shell Chemicals leader responded: ” Don’t hold your breath for it to happen.” The main issue, he said, is to do with ownership of the resources, as it requires quite a lot of wells and significant surface activity to develop shale gas fields.

“That works a better in places that are less densely populated, and a whole lot better if the mineral rights actually belong to landowners,” said van Beurden. “In North America, a lot of landowners love to see a drilling rig because that means money in the pocket.”

Mineral rights

In Europe, he said, mineral rights are held by the state “so the only thing landowners have is inconvenience. It will be more difficult to get those project permitted in countries like Holland, Germany and France though perhaps slightly less difficult in eastern European countries, such as Poland, where there is more receptiveness for these technologies.”

Addressing environmental concerns about hydraulic fracking of shale, the Shell Chemicals boss said the industry has been fracking wells for decades without any major issues.

“The whole idea that you would frack open reservoirs all to way to an aquifer is technically unfeasible, said van Beurden, though he admitted that this was a difficult discussion to have with the public.

“The best thing you can do is operate to the highest possible standards,” van Beurden concluded. “Ultimately, that argument is going to carry the day, but it is going to be a long journey.”