Appalachia: Competition for Louisiana?

U.S. Energy Secretary Rick Perry (The Associated Press/Susan Montoya Bryan)

Energy Secretary Rick Perry wants the U.S. to diversify its petrochemical infrastructure beyond Texas and Louisiana.

Speaking to the National Petroleum Council in Washington, D.C., last week, Perry noted the U.S. Department of Energy projects Appalachian Basin ethane production will surge to 640,000 b/d by 2025—more than 20 times 2013 levels. In a 91-page report to Congress, the Department of Energy highlights the potential for the development of an ethane storage hub in the region to take advantage of the low-cost natural gas and natural gas liquids produced from the Marcellus and Utica shales.

The secretary insists an Appalachian ethane storage hub not compete with Gulf Coast producers. Ethylene production capacity is highly concentrated in the United States Gulf Coast; more than 95% of U.S. ethylene production capacity is located in either Texas or Louisiana. Napoleonville is home to an NGL transit hub.

“If the Appalachian region were its own country, it would be the third-largest gas producer in the world,” Perry said, according to an S&P Global Platts report. “The potential raw product is there, and they have particularly wet NGLs that can be separated, value added.”

The establishment of an Appalachian Basin ethane storage and distribution hub in the heart of the Marcellus and Utica plays “could provide benefits to the broader petrochemical and plastics industries along the lines of supply diversity,” the report says. “The present-day geographic concentration along the Gulf Coast of petrochemical infrastructure and supply may pose a strategic risk, where severe weather events limit the availability of key feedstocks.”

From 2018 to 2025, total U.S. ethane value chain production capacity is estimated to increase more than 42 MMmt—or 51%. Of that additional capacity, 65% is expected in Texas and  Louisiana and 17% in Appalachia.

Read the DOE report.