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 ofSunoco Marcus Hook Industrial Complex Located NearPhiladelphiaRelease 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 andpotential economic ’second life’ that otherwise wouldn’t exist foraging refineriesAccording to a new study from IHS (NYSE: IHS), the leading global source of information and analytics, thephenomenal growth of shale oil and gas plays in the U.S. makes possible several reuse options thatotherwise wouldn’t exist for the Sunoco Marcus Hook Industrial Complex, a former oil refinery located southof 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 oilinto a wide range of petroleum and petrochemical products and was responsible for nearly 500 direct jobsin Delaware County, Pa. One of the nation’s oldest refineries, it had been in operation since 1902, and hademployed several generations of workers from the region.

“We identified several possible reuse options for the Marcus Hook facility, and what is interesting is thatmost of these opportunities are possible only as a result of the recent, phenomenal growth of the U.S. shaleoil and gas plays,” said Brendan O’Neil, managing director for IHS Consulting. “Without these plays, theoptions available to Marcus Hook would be more limited, and if pursued, could potentially provide aneconomic ‘second life’ to the complex, which has been a part of the Delaware County community since1902.”

IHS was commissioned to conduct the independent study by the Delaware County Council, whichappropriated funds and directed the Industrial Development Authority to undertake the study. The purposeof the study is to identify potential future redevelopment concepts that can best utilize the site’s assets tomaintain employment levels and perpetuate a sustainable local economy in Delaware County and the EastCoast region.

Said O’Neil: “Despite the fact that they don’t own the site, the Delaware Council was very proactive inseeking an independent assessment for reuse of this facility, which may serve as a model for othercommunities who are likely to face similar industrial shutdowns in the future — it shows a willingness tobring industry and community together to solve problems and to create economically sustainabledevelopment.”

To prepare the study, IHS called on its experts from across the organization — economic analysis from IHSGlobal 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 conductedan economic profile of the region and then followed with a supply/demand analysis of the markets forpotential alternative uses based on two broad categories: energy products storage and Marcellus shale-

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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) Ethanecracking and derivatives; and 2) Propane dehydrogenation.

According to the IHS study, while a market analysis of the seven reuse options all showed promise, someoptions had greater viability than others. The East Coast is advantaged, the report noted, in that it laysadjacent to the Marcellus shale development, a large geologic formation, despite the fact that productionfrom this region contains only minor crude oil and condensate production. A summary of the marketpotential of each option, as well as their job-creation potential and estimated capital costs, are shown in thechart below.

Proposed ReuseOptions

Market

Viability

Estimated

CapitalCosts

(Millions$)

JobCreation

Potential

(FTEs)

Comments

PropaneDehydrogenation High $300 to

$400 50 to 75 Existing polypropylene plant at site (Braskem) isready buyer of output from this reuse

Natural Gas LiquidsProcessing Facility High $300 to

$40075 to100

Synergies exist with existing plant infrastructure,lowering overall investment costs

Refined PetroleumProducts Storage High $50 to

$100 45 to 55 Minor modifications required for reuse; increasinglocal demand for petroleum products

Natural Gas PowerGeneration Medium $650 to

$75075 to100

Facility well positioned in mid-Atlantic markets;dwindling number of coal-burning plants

Ethane Cracking andDerivatives High $2,500 to

$3,000150 to200

High demand for polyethylene resins; site hascompetitive logistical advantages

Liquified Natural GasExport Terminal Low $2,000 to

$2,500150 to200

Strong overseas market; several LNG plantsalready have applied for permission to export

Gas-to-LiquidsProduction/Storage Low $4,000 to

$6,000300 to 400

Diesel markets especially attractive on the EastCoast

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 oncapital of repurposing options, the reuse of Marcus Hook for shale-based chemical processing, natural-gasliquids processing, and refined petroleum storage suggest the greatest market potential. However, the IHSstudy authors cautioned that job creation related to any of the reuses will not fully offset the jobs lost torefinery closure.

“This refinery is the primary economic engine that has supported the region for decades, so the future ofthis community is dependent upon our ability to identify and facilitate new, economically sustainable usesfor the site,” said Tom McGarrigle, chairman of the Delaware County Council. “However, the complexity ofthe issues involved required that we enlist a respected research firm who could take a multi-dimensional

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look at the situation. Only IHS had the depth and breadth to assess the economics, the regional and globalmarket trends, as well other issues relative to energy and chemical markets and industries. We are pleasedwith the findings of the study, because they offer some viable, positive paths forward for the Marcus Hookcomplex 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 feedstockcost advantage over most other regions of the world for producing certain petrochemical products, such asethylene or propylene,” said Anthony Palmer, managing director, IHS Chemical. “Both of these are possibleproducts that the Marcus Hook complex could deliver with modifications. Another reuse option for MarcusHook is for storage of refined petroleum products, which could leverage the site’s five underground granitecaverns for liquids. There are some infrastructure issues that would need to be addressed for each of theproposed uses studied, and a more in-depth assessment would certainly need to follow, but these optionsare viable.”

And according to Palmer, this study also may offer hope to other communities that are home to agingrefineries like the Marcus Hook complex, which are also facing closure due to a host of factors that haveimpacted 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; stagnantdomestic demand for petroleum products driven by the economic recession of 2008 to 2009; a highlycompetitive U.S. refining landscape that favors larger, more sophisticated Gulf Coast refineries, andlogistical isolation. “Unfortunately,” Palmer said, “many East Coast refineries are located too far from keysources 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 shutdownmid-year 2012. The ConocoPhillips Trainer refinery in Pennsylvania also was shutdown in 2011, but isscheduled to restart at the end of 2012 by new owner Monroe Energy. Combined, these three DelawareRiver corridor refineries produce nearly 700,000 barrels per day of refined products, or 50 percent of thetotal 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 DevelopmentOpportunity Reuse Study, please contact brendan.oneil@ihs.com. To speak with Anthony Palmer or otherstudy 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’sbusiness landscape. Businesses and governments in more than 165 countries around the globe rely on thecomprehensive 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 1959and became a publicly traded company on the New York Stock Exchange in 2005. Headquartered inEnglewood, Colorado, USA, IHS employs more than 6,000 people in more than 30 countries around theworld.

IHS is a registered trademark of IHS Inc. All other company and product names may be trademarks of their respectiveowners. © 2012 IHS Inc. All rights reserved.

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Language: English

Contacts:IHS Media RelationsMelissa Manning

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Source URL: http://press.ihs.com/press-release/energy-power/new-ihs-study-offers-potential-options-reuse-sunoco-marcus-hook-industria

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