PITTSBURGH—The size of the Marcellus and Utica shales is impressive enough, according to the U.S. Energy Information Administration—the Marcellus has an estimated 354 trillion cubic feet (Tcf) of recoverable natural gas, while the Utica has about 45 Tcfe. As the region’s oil and gas industry has grown, so has its reach.
These formations largely underlie western Pennsylvania, Ohio and West Virginia, but they heavily impact New York, Philadelphia, and hopefully soon, New England.
Another region of significant importance to the formations’ producers and operators is Sarnia, Ontario, Canada, which holds significant midstream and petrochemical operations and assets.
Sarnia’s biggest player is NOVA Chemicals, which has seen operations at its ethane cracker complex do a U-turn from concerns over its future to considerable expansion.
“Going back to 2005, we were concerned whether it had a life beyond 2010. The emergence of Marcellus supply, and the work we did in conjunction with our pipeline partners, have essentially taken the Sarnia plant and made it a very profitable facility as we continue to revamp it,” said John Hotz, vice president of corporate strategy, during the closing keynote Jan. 28 at Hart Energy’s Marcellus-Utica Midstream Conference & Exhibition .
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As the Marcellus continues to grow, an industry truism has been that Sarnia is an extended part of the Appalachian Basin’s midstream sector. The importance of the region to NOVA Chemical’s operations is highlighted by the fact that many of the company’s executives are located in its Pittsburgh commercial office.
Like the North American oil and gas industry, the petrochemical industry spent nearly two decades in a slow decline, facing rising costs and shrinking global market share.
“In the 1970s, 1980s and into the 1990s, the petrochemical industry was growing pretty rapidly, but it was being fueled by technology,” Hotz said. “The North American petrochemical industry began to struggle compared to global sectors, as it was high cost, and there wasn’t any thought of additional investment in new capacity after 2000.”
During this time frame, at least 10% of capacity was shut down because of costs and aging facilities, he said. The emergence of shale oil and gas changed all that, leading to the industry’s rebirth and repositioning it in the global market for cost.
“The Marcellus and Utica have really been a lifesaver for us in Sarnia. We have an ethylene cracker there that was designed and built as a naphtha cracker. In 2013, we completed the revamp of the facility from naphtha to one capable of running gas liquids,” Hotz said.
The cracker’s feed slate is now 70% ethane sourced primarily from the Marcellus. In December, NOVA received approval for final investment to convert that cracker to 100% ethane sourced from Marcellus and Utica production. That change will be completed by 2018.
Hotz added that the facility has the potential to expand capacity by 50% in 2022.At the same time, the company is planning to debottleneck the cracker by doubling it by 50%. It is also considering building another plant in that region.
The main discussion of a Marcellus-Utica hub has focused on building a world-scale cracker in Ohio, West Virginia or Pennsylvania, but by providing these services across the border, Sarnia will remain a key part of the region’s optionality in the coming years.
Frank Nieto can be reached at fnieto@hartenergy.com.
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