Down the Pipeline: Downstream Potential in Pennsylvania

Shale development in Pennsylvania is moving downstream. With upstream operations now a functioning constant in the Commonwealth, natural gas companies and investors have set their sights on downstream opportunities.

Shale gas developments are categorized by three classifications: upstream, midstream, and downstream. Gas extraction and any operations at the well site are considered upstream, midstream covers pipeline transfer of gas, and downstream encompasses the final use of the raw natural gas. While upstream and midstream operations are generally limited to gas extraction and transfer, downstream operations cover a broad spectrum of possibilities.

In Pennsylvania, downstream operations can be defined by Shell’s ethane cracker plant under construction in Monaca, Beaver County, and gas product export facilities in the Delaware River Basin. Both operations are key indicators as to the direction that the Marcellus and Utica shale basins are heading. Both also indicate a larger shift in the U.S. energy market. Historically, natural gas has been exported and chemical manufacturing occurred through facilities and ports in the Gulf of Mexico. This is changing. Shell’s cracker plant is the first such facility to be built outside of the Gulf of Mexico in two decades, and the Delaware River export terminal is the first to have direct pipeline access to Marcellus and Utica gas.

International companies and capital investors have taken note of this change, and are reacting accordingly. International chemical company PTT Global Chemical is close to a final decision on building an ethane cracker plant in Belmont County, Ohio, capable of producing 1.5 metric tons of ethylene, a building block of plastics, annually. 

The abundance of natural gas in the Marcellus and Utica shale basins is the region’s biggest attraction to these companies. The close proximity to the well sites translates to reduced costs in transporting natural gas to these individual facilities. Belmont County is the largest natural gas-producing county in Ohio, making it the optimal location for a cracker plant.

Pennsylvania is no different. Gas production in the Commonwealth was 14.7 percent higher in the first quarter of 2019 than the previous year. Chemical companies are not the only ones to take notice of the potential for increased downstream development. The Department of Energy estimates that the Marcellus and Utica shale basins can support up to four more cracker plants additional to Shell’s and PTTGC’s projects. Coupled with the export opportunities via the Delaware River Basin, the opportunities for chemical companies and other downstream-related companies are growing. This translates to economic growth for the Commonwealth, and unprecedented opportunity for the U.S. to become a major exporter of natural gas and natural gas products.