Press release from IHS Consulting announcing the results of a study there were commissioned to write (for $100K), about the potential uses for the now-idle petroleum refinery in Marcus Hook, PA (near Philadelphia). The study says that powered by natural gas and natural gas liquids from the Marcellus and Utica Shale region, the refinery can have a second life much like its first life.

1. Published on IHS Online Pressroom (http://press.ihs.com) on 6/27/12 1:08 pm EDT
New IHS Study Offers Potential Options for Reuse of
Sunoco Marcus Hook Industrial Complex Located Near
Philadelphia
Release Date:
Wednesday, June 27, 2012 1:08 pm EDT
Terms:
Energy & Power Energy & Power Media
Dateline City:
HOUSTON
Says IHS: Growth of US shale plays enable viable reuse options and
potential economic ’second life’ that otherwise wouldn’t exist for
aging refineries
According to a new study from IHS (NYSE: IHS), the leading global source of information and analytics, the
phenomenal growth of shale oil and gas plays in the U.S. makes possible several reuse options that
otherwise wouldn’t exist for the Sunoco Marcus Hook Industrial Complex, a former oil refinery located south
of Philadelphia on the banks of the Delaware River that was shutdown in December 2011.
When operational, the refinery, which sat on a 780-acre site, processed 175,000 barrels per day of crude oil
into a wide range of petroleum and petrochemical products and was responsible for nearly 500 direct jobs
in Delaware County, Pa. One of the nation’s oldest refineries, it had been in operation since 1902, and had
employed several generations of workers from the region.
“We identified several possible reuse options for the Marcus Hook facility, and what is interesting is that
most of these opportunities are possible only as a result of the recent, phenomenal growth of the U.S. shale
oil and gas plays,” said Brendan O’Neil, managing director for IHS Consulting. “Without these plays, the
options available to Marcus Hook would be more limited, and if pursued, could potentially provide an
economic ‘second life’ to the complex, which has been a part of the Delaware County community since
1902.”
IHS was commissioned to conduct the independent study by the Delaware County Council, which
appropriated funds and directed the Industrial Development Authority to undertake the study. The purpose
of the study is to identify potential future redevelopment concepts that can best utilize the site’s assets to
maintain employment levels and perpetuate a sustainable local economy in Delaware County and the East
Coast region.
Said O’Neil: “Despite the fact that they don’t own the site, the Delaware Council was very proactive in
seeking an independent assessment for reuse of this facility, which may serve as a model for other
communities who are likely to face similar industrial shutdowns in the future — it shows a willingness to
bring industry and community together to solve problems and to create economically sustainable
development.”
To prepare the study, IHS called on its experts from across the organization — economic analysis from IHS
Global Insight, chemical insight from IHS Chemical —including expertise from recently-acquired Purvin &
Gertz, and energy perspective from its experts at IHS CERA. In compiling its assessment, IHS first conducted
an economic profile of the region and then followed with a supply/demand analysis of the markets for
potential alternative uses based on two broad categories: energy products storage and Marcellus shale-
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2. based downstream chemical production.
IHS examined seven potential reuse options for the Marcus Hook facility. Five energy-based options: 1)
Natural gas liquids processing and fractionation facility; 2) Gas-to-liquids production and storage facility; 3)
Liquid natural gas liquefaction and export terminal; 4) Refined petroleum products import terminal; 5)
Natural gas driven power generation, as well as two Marcellus shale chemical-based options: 1) Ethane
cracking and derivatives; and 2) Propane dehydrogenation.
According to the IHS study, while a market analysis of the seven reuse options all showed promise, some
options had greater viability than others. The East Coast is advantaged, the report noted, in that it lays
adjacent to the Marcellus shale development, a large geologic formation, despite the fact that production
from this region contains only minor crude oil and condensate production. A summary of the market
potential of each option, as well as their job-creation potential and estimated capital costs, are shown in the
chart below.
Estimated Job
Market Capital Creation
Proposed Reuse
Comments
Options Viability Costs Potential
(Millions$) (FTEs)
Propane $300 to Existing polypropylene plant at site (Braskem) is
High 50 to 75
Dehydrogenation $400 ready buyer of output from this reuse
Natural Gas Liquids $300 to 75 to Synergies exist with existing plant infrastructure,
High
Processing Facility $400 100 lowering overall investment costs
Refined Petroleum $50 to Minor modifications required for reuse; increasing
High 45 to 55
Products Storage $100 local demand for petroleum products
Natural Gas Power $650 to 75 to Facility well positioned in mid-Atlantic markets;
Medium
Generation $750 100 dwindling number of coal-burning plants
Ethane Cracking and $2,500 to 150 to High demand for polyethylene resins; site has
High
Derivatives $3,000 200 competitive logistical advantages
Liquified Natural Gas $2,000 to 150 to Strong overseas market; several LNG plants
Low
Export Terminal $2,500 200 already have applied for permission to export
Gas-to-Liquids $4,000 to 300 to Diesel markets especially attractive on the East
Low
Production/Storage $6,000 400 Coast
Source: IHS—Sunoco Marcus Hook Industrial Complex Economic Opportunity Reuse Study
While the IHS study notes that deeper analysis is needed to fully discern the potential rate of return on
capital of repurposing options, the reuse of Marcus Hook for shale-based chemical processing, natural-gas
liquids processing, and refined petroleum storage suggest the greatest market potential. However, the IHS
study authors cautioned that job creation related to any of the reuses will not fully offset the jobs lost to
refinery closure.
“This refinery is the primary economic engine that has supported the region for decades, so the future of
this community is dependent upon our ability to identify and facilitate new, economically sustainable uses
for the site,” said Tom McGarrigle, chairman of the Delaware County Council. “However, the complexity of
the issues involved required that we enlist a respected research firm who could take a multi-dimensional
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3. look at the situation. Only IHS had the depth and breadth to assess the economics, the regional and global
market trends, as well other issues relative to energy and chemical markets and industries. We are pleased
with the findings of the study, because they offer some viable, positive paths forward for the Marcus Hook
complex and for our communities in Delaware County.”
“With the recent shale developments and the abundance of cheap natural gas, the U.S. now has a feedstock
cost advantage over most other regions of the world for producing certain petrochemical products, such as
ethylene or propylene,” said Anthony Palmer, managing director, IHS Chemical. “Both of these are possible
products that the Marcus Hook complex could deliver with modifications. Another reuse option for Marcus
Hook is for storage of refined petroleum products, which could leverage the site’s five underground granite
caverns for liquids. There are some infrastructure issues that would need to be addressed for each of the
proposed uses studied, and a more in-depth assessment would certainly need to follow, but these options
are viable.”
And according to Palmer, this study also may offer hope to other communities that are home to aging
refineries like the Marcus Hook complex, which are also facing closure due to a host of factors that have
impacted demand and profitability for refined petroleum products.
The main contributing factors to these proposed shutdowns, he said, include fuel substitution driven by U.S.
legislation mandating that more biofuels be injected into the U.S. transportation fuel pool; stagnant
domestic demand for petroleum products driven by the economic recession of 2008 to 2009; a highly
competitive U.S. refining landscape that favors larger, more sophisticated Gulf Coast refineries, and
logistical isolation. “Unfortunately,” Palmer said, “many East Coast refineries are located too far from key
sources of feedstock production to be cost competitive.”
According to the IHS study, of 11 East Coast refineries only six are currently operating, and one of those six,
the Sunoco Philadelphia facility, is for sale. Unless a buyer is found soon for the refinery, it will be shutdown
mid-year 2012. The ConocoPhillips Trainer refinery in Pennsylvania also was shutdown in 2011, but is
scheduled to restart at the end of 2012 by new owner Monroe Energy. Combined, these three Delaware
River corridor refineries produce nearly 700,000 barrels per day of refined products, or 50 percent of the
total East Coast region’s refining capacity, which includes facilities from Maine to Florida.
For more information on the IHS Sunoco Marcus Hook Industrial Complex Economic Development
Opportunity Reuse Study, please contact brendan.oneil@ihs.com. To speak with Anthony Palmer or other
study authors, please contact melissa.manning@ihs.com, or press@ihs.com.
About IHS (www.ihs.com)
IHS (NYSE: IHS) is the leading source of information, insight and analytics in critical areas that shape today’s
business landscape. Businesses and governments in more than 165 countries around the globe rely on the
comprehensive content, expert independent analysis and flexible delivery methods of IHS to make high-
impact decisions and develop strategies with speed and confidence. IHS has been in business since 1959
and became a publicly traded company on the New York Stock Exchange in 2005. Headquartered in
Englewood, Colorado, USA, IHS employs more than 6,000 people in more than 30 countries around the
world.
IHS is a registered trademark of IHS Inc. All other company and product names may be trademarks of their respective
owners. © 2012 IHS Inc. All rights reserved.
###
Language:
English
Contacts:
IHS Media Relations
Melissa Manning
Source URL: http://press.ihs.com/press-release/energy-power/new-ihs-study-offers-potential-options-reuse-sunoco-marcus-hook-
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