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Secretary Perry Announces Appalachian Ethane Storage Hub Report

 

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The U.S. Department of Energy (DOE) published a Report to Congress:  Ethane Storage and Distribution Hub in the United States.  The report highlights the potential in Appalachia for the development of a new ethane hub based on the tremendous low-cost resource from the Marcellus and Utica shales, and the accompanying security and reliability benefits derived from geographic diversity in the nation's petrochemicals manufacturing base.

"There is an incredible opportunity to establish an ethane storage and distribution hub in the Appalachian region and build a robust petrochemical industry in Appalachia," said U.S. Secretary of Energy Rick Perry today (12/4) at the annual National Petroleum Council Meeting in Washington D.C. "As our report shows, there is sufficient global need, and enough regional resources, to help the U.S. gain a significant share of the global petrochemical market. The Trump Administration would also support an Appalachia hub to strengthen our energy and manufacturing security by increasing our geographic production diversity."

The United States is now the top producer of oil and natural gas in the world, with an additional benefit in the form of increased natural gas liquids (NGLs), including ethane. Some NGLs are burned for space heating and cooking while others are blended into vehicle fuel.  Ethane is particularly useful as a feedstock for petrochemical manufacturing.  Ethane production in the Appalachian basin is projected to continue its rapid growth through 2025 to a total of 640,000 barrels per day, more than 20 times greater than just 5 years ago.

The Appalachian region has experienced near-exponential growth in natural gas production, and that production is expected to increase for decades to come. The region is home to the Marcellus and Utica shale formations, and were it an independent country, Appalachia would be the third-largest natural gas producer in the world.

According to the Energy Information Administration, production in Ohio, Pennsylvania, and West Virginia has increased so rapidly that their combined share of total U.S. natural gas production has jumped from only 2% in 2008 to 27% in 2017. In addition, natural gas liquids (NGLs) processing and fractionating capacity in Appalachia has grown quickly to match this increase in natural gas production.  However, the Appalachian region currently lacks other physical infrastructure for a "hub" that connect supply and demand sources, including storage for the liquids. 

This Report to Congress examines the potential for a hub by comparing it to existing ones that already service the Gulf Coast and Permian Basin, which account for most of the U.S. growth in NGLs outside of Appalachia.  In addition, market analysis from the report emphasizes that the development of an Appalachian hub may offer a competitive advantage for the U.S. to gain global petrochemical market share while not being in conflict with Gulf Coast expansion.  The report explains that a new Appalachian hub would enhance the geographic diversity of the vital US petrochemical industrial sector, supporting U.S. economic security.    

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