An ethane market is developing in the Northeast as Shell (SHEL) finally ramps operations at the Monaco cracker in southwestern Pennsylvania. Ethane production in the Marcellus and Utica hit a record in 1Q24 thanks to growing flows to the new polyethylene plant.
As ethane demand in the Northeast goes, so too does ethane supply. Ethane production rose to almost 350 Mb/d from the region in 1Q24 (refer to the green line graph in the figure below). East Daley’s Purity Product Forecast estimates another 270+ Mb/d of ethane is also rejected into the gas stream. That rejected ethane will not be recovered without new capital projects connecting recoverable ethane to demand markets.
EDA recently highlighted Energy Transfer’s (ET) ethane dock expansion near Philadelphia, PA that will add an estimated 25 Mb/d of dock capacity in 2025. The project will deliver Northeast ethane via ET’s ME2X pipeline to demand in Norway (INEOS) and Sweden (Borealis).
The Shell Polymers Monaca plant is another source of latent demand growth. The cracker in Beaver County, PA is the only petrochemical complex located within the Appalachian Basin. The Monaca plant entered service in 3Q22, but Shell has struggled to keep the facility running and experienced significant downtime in 2023.
The latest pipeline data points to encouraging signs for the Monaca complex. The Falcon Pipeline, a system built by Shell to source ethane for the polymer cracker, reported its highest throughput ever in 1Q24. The Falcon system has a capacity of 107 Mb/d and can deliver ethane extracted from MPLX’s Cadiz and Houston processing plants (refer to the map below).
Shell has already spent $14B on the Monaca plant and may not be out of the woods. The Pennsylvania Department of Environmental Protection (DEP) recently extended temporary air permits until Shell receives a federal Title V Operating Permit for air emissions. Based on the letter from the Pennsylvania DEP, the Title V permit is due on June 21.
Assuming the permit is filed and approved, there is another ~25 Mb/d of ethane demand that has yet to surface. Earlier this year, Shell’s CEO Wael Sawan revealed two of the three polyethylene trains are operating at capacity, and said the Monaca plant will not be fully online until 2025 or ’26. – Rob Wilson and Christina Adjiman Tickers: ET, MPLX, SHEL.
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