Former Sunoco refinery in Marcus Hook will process Marcellus Shale products

Sunoco Inc. announced Wednesday that its shuttered Marcus Hook refinery would be reborn as a facility to process Marcellus Shale natural-gas products, fueling new construction and traffic through the Delaware River port.

Sunoco's pipeline subsidiary, Sunoco Logistics Partners L.P., is moving forward with a plan to transport high-value propane and ethane by pipeline from Western Pennsylvania to Marcus Hook, where the materials will be processed in a new plant and shipped by sea to domestic and export markets.

State officials hailed the project - which Sunoco calls Mariner East - as a boost for Pennsylvania's Marcellus Shale industry by connecting the areas producing natural gas in Western Pennsylvania to markets linked to Philadelphia.

"I have long held that the Marcellus Shale is an important resource that over time would benefit the entire commonwealth," Gov. Corbett said in a statement.

The pipeline project is the latest industrial venture built on confidence that the Marcellus Shale, where full-scale production began barely four years ago, represents a long-term reliable energy supply.

Sunoco Logistics announced the Mariner East project in 2010 as a way to repurpose an underused Sunoco pipeline that historically moved refined products from east to west.

Sunoco Logistics and its partner, MarkWest Energy Partners L.P., conceived of reversing the pipeline flow to move the abundance of natural-gas liquids derived from the "wet" gas produced in Western Pennsylvania. MarkWest, based in Denver, is a leading processor of natural-gas liquids.

The Mariner East project envisions moving ethane and propane from Marcus Hook by sea to petrochemical plants overseas or along the Gulf Coast that value the natural-gas liquids as a raw material for plastics.

Range Resources Corp., the Marcellus pioneer whose drilling operations are concentrated in liquids-rich parts of southwestern Pennsylvania, has signed a 15-year agreement as the anchor shipper. Range has committed to provide 40,000 barrels of the project's 70,000-barrel-per-day capacity.

Range, based in Fort Worth, Texas, has lined up a customer for its ethane. It announced Wednesday that it had signed a separate 15-year agreement with affiliates of INEOS A.G., a Swiss petrochemical producer that will take delivery of the material at Sunoco's Marcus Hook docks. INEOS has plants in Europe, the Americas, and Asia.

The Mariner East project is one of several ventures that have been competing to capture a share of the valuable ethane market.

Sunoco Logistics and MarkWest also teamed on a project called Mariner West, which is converting a pipeline to ship ethane from Western Pennsylvania to a petrochemical plant in Sarnia, Ontario.

Enterprise Products Partners L.P. is moving ahead with a pipeline to move ethane overland from Appalachia to Texas.

And Shell Chemical L.P. announced in March that it had selected a site in Beaver County to build an "ethane cracker" by 2017 to convert the material into petrochemicals in Pennsylvania.

Mariner East is expected to be transporting propane by the second half of 2014 and delivering propane and ethane in the first half of 2015. Construction will employ about 450 people.

Sunoco Logistics is investing $600 million in the two Mariner projects, company spokesman Thomas P. Golembeski said.

Industry officials suggest the Mariner East project may be only the beginning. Sunoco Logistics said that based on the "significant interest" it had received from producers and industrial customers of liquids, it was already evaluating a second "open season" to expand the pipeline's capacity.

Range Resources, a major shipper on all three ethane pipelines, said its 15-year commitments still represented only 30 percent of the one billion barrels of natural-gas liquids in its reserves in southwestern Pennsylvania.

Jeff Ventura, Range's president and chief executive, said the Mariner East project could "help to serve as a building block for the potential expansion of the region's petrochemical industry."

It also will bring new supplies of propane into Northeastern markets, where it has broad residential and industrial applications.

As part of the pipeline project, which requires approval by the Federal Energy Regulatory Commission, Sunoco Logistics will construct a pipeline from MarkWest's processing complex in Houston, Pa., to the existing Sunoco pipeline in Delmont, Pa. MarkWest separates the ethane and propane from natural gas through a supercooling process that converts the material into liquids.

The pipeline will move the liquids to Marcus Hook, where Sunoco Logistics will construct facilities to process, store, chill, and distribute the fuels to regional and overseas markets.

MarkWest this year started delivering propane to Marcus Hook by rail for export.

Local and state officials have promoted the Marcus Hook facility as a regional "energy hub" since Sunoco shut down the petroleum refinery there in December.

Two other refineries in the region that recently changed ownership - the former Sunoco refinery now known as Philadelphia Energy Solutions and the Delta Air Lines refinery in Trainer - both envision using Marcellus gas to reduce their costs.