Tag: cracker plant

Energy on the Rebound

Don’t give up on the energy sector as an economic driver just yet. Crushing declines in the price of oil and gas have hit the producers hard. There has been a pullback in the amount of space used by companies in the gas sector for two years or more. In early 2016, however, there are signs of life. Experts who follow the energy commodities point out that the historical trend with oil price plunges is for several big drops to occur, followed by reinvestment by the firms that kept their powder dry. Sort of like what Warren Buffet has done his whole career.

Bidding has picked up for some of the compressing/processing facilities in the midstream. In at least a couple cases, projects that were shelved in late fall have come back on the front burner. Similarly, the big energy project in the region is also reported to have been accelerated. The Shell cracker plant is definitely in the “believe it when I see it” category but the procurement suggests the final investment decision has been made, if not announced. Regardless of the timetable for announcement. This is what the site looked like from I-376 this morning:IMG_20160303_095117596

That’s a lot of work done. For those that can zoom in, the small square structures just to the left of the plumes from Shippingport are the Nova Chemicals plant about 2 miles away.

Elsewhere in the energy sector, Black & Veatch awarded a contract to PJ Dick for site prep, earthwork, concrete, roads, etc. for the $500 million Tenaska power plant to be built near I-70 in South Huntington Twp. of Westmoreland County. Packages are being bid on another gas-fired plant, a $900 million project by Combined Power Ventures in Cambria County near the town of Vinco. The low gas prices that are hurting the Marcellus Shale play are making combined-cycle plants more viable.

In commercial project news, Rycon Construction was chosen for the renovation of 1 PNC Plaza and PJ Dick was chosen for 2 PNC. The projects were valued by the PA Builders Exchange at $13 million and $15 million respectively. The PABX also reported that MBM Contracting was chosen to do Duolingo’s buildout of 15,000 sq. ft. at 5900 Penn. Construction is just starting on Ashley Capital’s 316,000 sq. ft. warehouse in Findlay Industrial Park. Oliver Hatcher Construction is the contractor. PW Campbell is preparing to start work on a 26,535 sq. ft. new dealership for Day Apollo Subaru in Moon Township.

 

Analyzing the Low Oil Price

It’s not clear whether Royal Dutch Shell would have taken this long to make a final decision to proceed on its ethane cracker had the oil price stayed at $100/barrel. Certainly, Shell and its competitors have been forced to downsize and reel in capital spending to remain profitable to the degree that shareholders demand. Lower profits were part of the reason that Chevron put its regional HQ project on hold and the price environment seems likely to have extended the decision-making process for the Monaca project; but has the decline in oil and natural gas hurt the Pittsburgh region in the way that Texas or North Dakota has been hurt?

Real estate service company CBRE Inc. published an energy market report Tuesday morning that covers this issue very well. Its conclusion is that Pittsburgh hasn’t been negatively impacted much at all, except to the degree that the exploration and expansion of the Marcellus and Utica formations has slowed.

You can read the full report here: CBRE Energy Report 2015_Pittsburgh

Another Step Forward for the Cracker

As was reported in BreakingNews and BuildingPittsburgh on June 19, the Dept. of Environmental Protection announced today that it had issued the air pollution control permit for the operation of the ethane cracker and polyethylene production facility in Monaca. The permit was a major hurdle to overcome in the planning process for the plant.

The site plan for the proposed polyethylene complex. Image courtesy Shell Chemicals.
The site plan for the proposed polyethylene complex. Image courtesy Shell Chemicals.

Shell spokesman Michael Marr reiterated that the permit is just one piece of the decision-making process but his comments revealed little in the way of further obstacles to the project’s progress.

Additional steps still remain, including implementing the permitted preliminary work at the site, finalizing the engineering and design work for the facility, and continuing to strengthen our long-term feedstock portfolio,” Marr was quoted saying in the Pittsburgh Business Times.

Activity at the site is already heavy. The Mascaro/Trumbull Energy Services team has people working at the site, along with other early works subcontractors. A key project that should be starting soon is the construction of the marina and docks by Joseph B. Fay Co. Much of the cracker plant itself will be fabricated off site and shipped to the project by barge. Look to that project as a key indicator.

GDP Grows 3.7% in Last Six Months

Gross domestic product grew at a seasonally adjusted annual rate of 3.2% in the fourth quarter, the Commerce Department reported on January 30. The latest figures show the economy expanded at a 3.7% pace in the second half of 2013 compared to the 1.8% pace in the first half of the year. The last year in which there was stronger growth in the last six months was 2003. The growth during that period marked the beginning of a four-year expansion. For the full year, the economy grew by 2.7% compared to 2012.

GDP growth in the fourth quarter is even more impressive when you factor in the government shutdown that lasted for the first three weeks of the quarter. Growth was also offset by an even lower rate of inflation, which fell to 0.7% during the last three months of 2013.

In local construction news, Brandenburg has been selected for the demolition of the Horseheads plant in Monaca. The former zinc facility, which is in the process of decommissioning and shutdown, is on the site that Shell has identified as its preference for a world-class ethane cracker. Reports from Beaver County real estate sources indicate that Shell has acquired or is in negotiations to acquire at least two additional parcels adjacent to the Horseheads property. No decision to proceed with the project has been announced yet.

Fairchance Construction was selected to build the $14 million Yester Square Apartments in McKeesport. BRIDGES & Co. is the successful contractor for the new 37,000 square foot Salvation Army store in Uniontown.

Cracker Speculation

Today’s Pittsburgh Business Times had the front page dedicated to a story suggesting that the pipeline infrastructure investment underway was making the cracker plant in western PA unnecessary. Last weekend the Wall Street Journal published a small story suggesting the same thing (coincidence PBT?). Expect a bunch of piling on from other local and business media.

The essence of both stories is that so much pipeline capacity is being built that it makes more sense to just pipe the ethane to the Gulf to the existing cracker infrastructure. It’s important to remember that no sources with direct knowledge are quoted or anonymously cited and the use of the word “may” (as in may happen) is rampant in the writing.

I can’t argue the logic of the articles nor do I possess the experience in the petrochemical industry to comment on the feasibility. I do, however, talk to people involved with the project behind the scenes and a few things are worth noting:

1) The infrastructure being referenced was needed for the output that is coming, regardless of where the ethane goes. Moreover, the infrastructure isn’t going to the Gulf; it’s connecting to the existing infrastructure outside the region that goes to the Gulf, meaning it can easily serve the petrochemical industry in PA.

2) Engineering for the project is going on as we speak. While no contracts for EPC for the plant or the decommissioning of the Horseheads plant have been announced, preliminary pricing and sourcing is going on. Those involved say that the activity has accelerated in recent months rather than slowed.

3) The secondary pipeline infrastructure that is being built at the same time seems to be telling a different story. It’s pointing to Monaca. Tony Rosenberger from Chapman Properties was flying over a Washington Co. site recently and was stunned to see the amount of green pipe being laid out (a similar story is taking place in Beaver Co.), all going to the same spot on the Ohio River.

Shell may indeed be delaying the decision because they see less justification for the $2 billion investment. Remember that the reason that the cracker was proposed here in the first place was not just because the gas was here but more importantly because the consumers of the products made downstream were within 500 miles of here. There’s a cost associated with sending ethane 1,500 miles southwest and then shipping 60% of what is made with the ethylene that is cracked back to this region.

My bet is still for a thumbs up from Shell and sooner rather than later.

Spring Thaw for the Market

After the heightened activity between Thanksgiving and New Year’s it’s understandable that the bidding market would take a breather during January and February but the extended slower period was beginning to make contractors and suppliers a bit edgy (and aggressive). The market has begun to bloom a bit over the past two weeks.

The cracker plant win has had literally nothing to do with the better conditions but the uptick in activity did seem to coincide with the announcement. But I do mean coincide. In the gas sector the activity is accelerating in midstream facility construction. This morning’s article about the proposed Appalachian Superior compressor station near the Mills Mall underlines the uptick. That station would be the first in Allegheny County but at least 5 others are being planned within a 25 mile drive north of the site. Keystone Midstream has applications in for 4 plants in southern Butler County and Mountain Gathering is working on 2 others. Work has started on 2 more stations in western Washington County by MarkWest Development. Several of these are smaller – involving 5 compressor units – but even those will involve $10 million projects.

The buzz about office building construction is growing as well. Highmark’s purchase or option activity in the north is now ‘on the radar’ for most business development pros. With 4 buildings of at least 125,000 sq. ft. announced at Southpointe by Horizon or Burns & Scalo you might think that a temporary glut is looming but reports about Horizon’s first project are that the leasing is brisk and the building may already be more than 50 percent leased (even without a completed design). Rumors abound of multiple deals in Cranberry and multiple 100,000 sq. ft. plus users looking. Connecting the dots between users and development deals shouldn’t be too hard but a number of the users will be surprises. And prospects for downtown continue to blossom, including the possibility that a large natural gas or energy player is looking hard at a high visibility location.

Hospital construction is getting downright exciting. The team continues to expand/change at Highmark/West Penn Allegheny, with new execs, new professionals and changing roles for the original players in the new version of WPAHS. Former West Penn Hospital facility manager Bill Marshall has joined the Highmark team and Oxford Development has been retained to assist Highmark with their development. The next big announcement in this sector should be UPMC’s choice for the CM at the CIS project in Shadyside. The hospital interviewed its four finalists – Turner. Massaro/Clark, PJ Dick/McCarthy and Mascaro/Gilbane –  this week and it’s a hard race to handicap. Mascaro is already working on the exterior of the former Ford Motor building at Baum & Morewood so you might like their chances but I doubt anyone – including Mascaro – is counting the project out yet.

[twitter-follow screen_name='Jeffreyburd']

It’s a Cracker!

OK, now that we’ve had the time to take a deep breath we can look at last Wednesday’s announcement of Shell’s preferred site with a bit more perspective.

First things first. There is no downside to Shell picking the old Horseheads zinc site for their ethane cracker. Regardless of how events unfold from here the Western PA region is better off today than last Tuesday if only for the potential. That said however, it’s important to temper our regional enthusiasm with the knowledge that the decision to proceed with plant construction is still a year or more away and construction itself is at least two years out. The real beneficial impact of the plant – the development of the many downstream industries here – will be years further away.

The acute problem facing the natural gas industry hasn’t changed. Prices are still so low that extraction and processing is a losing proposition right now. It is fortunate for stakeholders in Western PA that the Marcellus Shale formation contains more profitable wet gases like ethane, propane and butane so the drillers will continue in the southwest corner of the state. We’re also lucky to have the oil-laden Utica formation easily accessible in Butler, Beaver and Lawrence counties so that upstream and midstream activities – like fractionation and distribution – will continue to expand.

For the gas industry to fully mature in our region the price will have to increase to its more normal levels, meaning that gas will be at $5-8/MmBtu. The most productive way for that to happen will be for gas to replace fossil fuels, increasing demand while decreasing the dependence on oil as a fuel or coal as an electricity generation source. That will take more investment or energy policy action than is going on right now.

Until something happens to push demand and natural gas prices higher the opening of the Shell cracker facility will remain on the horizon. Of course, it’s better that it’s on the horizon in Beaver Co. than elsewhere.

[twitter-follow screen_name='Jeffreyburd']

The Gas Industry is Tapping the Brakes

Since the first of the year have come the first indications that the exploration of the Marcellus Shale will not be transforming the region at breakneck speed. For more than a year the depressed price of gas has been troubling for the industry but the dip down to $2.50 MMbtu has prompted a change in strategy.

First is the shifting of resources from the northeastern corner of the state to the southwest to take advantage of the additional gases that can be gathered and sold from the wet gas that is found in the Marcellus Shale. That’s a plus for our region.

Second is that the high price of oil is an incentive for the gas companies to look at exploring the Utica formation because it contains oil as well as natural gas. That’s not as good for western PA since the Utica formation is more accessible in OH. The heightened interest in Utica will help with the activity in Butler, Beaver and Lawrence Counties as the Utica shale is closer to the surface too.

Drillers are also beginning to look at other formations that have natural gas deposits to see what the related oil/gas properties are. The Marcellus is going to be a big play for a long time but the speed of its development will be throttled back while gas remains cheap.

The slowdown in exploration may or may not be related to the dragging on of the announcement of the Shell and Aither cracker plant locations. What was to be an ‘end of the month’ announcement in January seems no closer to being made in mid-March and a statement made last week by Sheel CEO Peter Voser at an energy conference in Houston hints that Shell is in no hurry. Voser commented that the Dutch company’s final decision on the investment was “quite a few years away.” A shell spokesperson clarified later that Voser meant that the planning would take a few years but that a decision was imminent. No definition was made of ‘imminent.’

[twitter-follow screen_name='Jeffreyburd']

Charlie restaurateur knits cover shipping adderall to uk