The Potential for the Siting of
an Ethane Cracker in the State
John Houston
Senior Vice President, Bayer Corporation
North America – Business Structure
Breakdown of Total Sales by Subgroup 2010
25 %
56 %
MaterialScience
HealthCare
EUR
8.2 billion
19 %
CropScience
• Employees in United States: ~15,100
• Employees in West Virginia: ~1,000
• Employees in Pittsburgh: ~2,700
Pittsburgh/West Virginia =
24.5% of all U.S. Employees
As of December 31, 2010
Page 2 • The Potential for the Siting of an Ethane Cracker in the State • June 21, 2011
bo·nan·za [buh-nan-zuh]
–noun
1: rich mass of ore, as found in mining.
2: a source of great and sudden wealth or luck; a spectacular windfall
–noun
1: an exceptionally large and rich mineral deposit (as of an ore, precious
metal, or petroleum)
2: a something that is very valuable, profitable, or rewarding
: a very large amount
: extravaganza
Ethylene Demand Driven By
What We Consume
Polystyrene/
ABS
PVC
Ethylene
LDPE
Polyethylene
PET/Ethylene
Glycol
LLDPE
HDPE
Source: Chemical Market Associates, Inc.
Page 4 • The Potential for the Siting of an Ethane Cracker in the State • June 21, 2011
U.S. Ethane Supply/Cracker Capacity
Source: Bentek
Page 5 • The Potential for the Siting of an Ethane Cracker in the State • June 21, 2011
U.S. PE Converters 2010
71 to 105 companies
41 to 70 companies
21 to 40 companies
11 to 20 companies
6 to 10 companies
1 to 5 companies
Source: CMAI
Page 6 • The Potential for the Siting of an Ethane Cracker in the State • June 21, 2011
Statistics
According to the WVONGA-commissioned study by WVU,
Marcellus shale development by 2015 could mean
 6,600 and 19,600 additional jobs for the Mountain State
 $890 million in employee payrolls (in 2015)
 20% growth rate each year
According to the American Chemistry Council,
a 25% increase in ethane supply could mean
 17,000 new knowledge intensive, high paying chemical industry jobs
 395,000 jobs outside the chemical industry
 More than $4 billion in federal, state and local tax revenue annually
over 10 years
 Nearly $33 billion increase in American chemical production
 About $16 billion in chemical industry capital investment to build new capacity
 More than $132 billion in U.S. economic output
Page 7 • The Potential for the Siting of an Ethane Cracker in the State • June 21, 2011
Bayer’s Potential Scenario
Photo: Ras Laffan Olefin Cracker in Qatar
Page 8 • The Potential for the Siting of an Ethane Cracker in the State • June 21, 2011
Why West Virginia? Why Bayer?
 Well positioned for both feedstocks and consumers
 Direct access to major highways, waterways, railroads, pipeline
 Available Land
 Ethylene producers likely to build where they have an anchor
 Long term security of feedstock supply is a key
 Project needs a champion
Page 9 • The Potential for the Siting of an Ethane Cracker in the State • June 21, 2011
Liquids from Wet Shale Gas
Seeking a Home
Steam
Crackers
Source: EIA
Page 10 • The Potential for the Siting of an Ethane Cracker in the State • June 21, 2011
Tug of War
Page 11 • The Potential for the Siting of an Ethane Cracker in the State • June 21, 2011
Questions
Ethylene – The Ethane / Ethylene
Family Tree
Ethane
(C2H6)
Acetic Acid (CH3COOH)
Annual Global Production: 6.5M tons
Polymerization
Vinyl Acetate Monomer (VAM)
Acetic Anhydride
40-45% of Global Acetic Acid
25-30% of Global Acetic Acid
Wood glue, Paints, Adhesives
Synthetic fibers & fabrics
Synthetic textile, photographic film
Ester of Acetic Acid
Food Additive (E260)
Polyethylene
~50% of Global Ethylene
World’s most widely used plastic
Halogenation &
Polyvinyl Acetate
Cellulose Acetate
Unsaturated
Hydrocarbon
Ethylene (C2H4)
World’s Highest Vol. Organic Compound
Annual Global Production: 113M tons
Polymerization
Polyethylene terephthalate
31.1M Tons in 2000
Polymerization
O
R
Polyvinyl Chloride (PVC)
Annual Global Production: 30+M tons
Clothing, upholstery, hoses, tubing, flooring
Inks, paints, coatings
Acidity regulator, condiment (vinegar)
Vinyl Chloride (CH2=CHCl)
Alkyl Alkanolamines
Absorbents, Coatings, Detergents
Flocculants, Metalworking, Textiles
Ethanolamines
Adhesives, Agro, Cleaners,
Pharma, Printing, Surfactants
Ethylene Oxide (C2H4O)
Annual Global Production: 20M tons
Soft drink bottles
Ethyleneamines
Corrosion Inhibitors, Coatings, Detergents
Fungicides, Lubes, Surfactants
Glycol Ethers
Polar Protic Solvent
Acetaldehyde (CH3CHO)
Annual Global Production: 1M tons
Brake Fluids, Detergents, Paints/Inks,
Pharma, Plasticizers, Solvents
Glycol Ester Acetates
Adhesives, Coatings, Heat Transfer,
Inks, Paints, Polyester, HI&I
Oligomerization
Alpha Olefins
Precursors, Detergents, Plasticizers,
Lubricants, Additives
Ethylene Glycol
Antifreeze/Deicing, Dye/printing,
Hydraulics, Latex, PET
Polyurethanes
Rigid & Flexible Polyols, Coatings,
Adhesives, Sealants, Elastomers
Alkylation
Page 13 • The Potential for the Siting of an Ethane Cracker in the State • June 21, 2011
Ethylbenzene
Solvents
Precursor to styrene
(packaging and rubber)
Adhesives, Agro, Dry Cleaning, HI&I, Inks
Paints, Coatings, Rubber & Polymer Mfg.
Heavy Feeds & Polyethylene
Dominate Global Ethylene Market
120 Million Tons Ethylene
2010 Ethylene
2010 Ethylene
Ethane
Other
Propane &
Butane
Supply
33%
2%
EDC/VCM/PVC
Styrene
7%
12%
Naphtha/Gas Oil
53%
Page 14 • The Potential for the Siting of an Ethane Cracker in the State • June 21, 2011
11%
Demand
Ethylene
Oxide/Glycol
13%
Other
8%
Polyethylene
61%
An Ethane Primer
 Only two uses for ethane
 Keep it in the NG stream or separate it out for chemicals production
 Natural gas price sets the floor value
 Yields only ethylene, hydrogen, and fuel gas when cracked
 Ethane cracker capital costs are low
 Every 10 cent move in ethane price changes cash costs by 4 cents
 A cracker consumes roughly 1.29MT of ethane for 1MT of ethylene
 A 1 MM MT/year cracker consumes ~ 63K BPD
Page 15 • The Potential for the Siting of an Ethane Cracker in the State • June 21, 2011
Olefins Flow Diagram
Energy
Feedstocks
Petrochemicals
Crude Oil
Refinery
Gas
Separation
Unit
Ethylene
Propylene
Methane/Hydrogen
Naphtha
Gas Oil
Ethane
Propane
Butanes
Field
Condensates
Ethylene
Unit
Page 16 • The Potential for the Siting of an Ethane Cracker in the State • June 21, 2011
Butadiene
Mixed Butylenes
Pygas
Benzene
Toluene/Xylene
Heavy Aromatics
C5/C6 Non Aromatics
Fuel Oil
Natural Gas
Crude C4
U.S. Ethylene Expansion “Talk” In The
Press ~ 4.0 Million Tons By 2017
Company
2012
Announced (-000- MT)
Westlake, Lake Charles
Ineos, Chocolate Bayou
Chevron Phillips
Dow
Equistar
2013
110
115
2014
2015**
2016+
110
1200*
384
230
Unconfirmed (-000- MT)
Williams
Formosa
1400*
100
450
Total
839
100
110
1650
1400
Cumulative Total
839
939
1049
2699
4099
* Dow and ChevronPhillips capacity additions shown are CMAI estimates
** 1 MM metric tons Braskem/Idesa JV in Mexico expected to start-up in 2015/16
Page 17 • The Potential for the Siting of an Ethane Cracker in the State • June 21, 2011