One Bright Spot Amid A Slew Of Canceled Energy Projects

As energy companies large and small abandon new capital spending projects, one initiative – albeit a relatively small one – remains on the table.

Ashtabula Energy, a Houston-based division of Velocys Inc., plans to build a $200 million refinery that would convert natural gas to liquids in Ashtabula in northeastern Ohio, on the shore of Lake Erie and has applied for a permit to do so by the Ohio Environmental Protection Agency.

The plant, situated on an 80-acre site that once was part of the industrial city’s Union Carbide factory, would convert 2,800 barrels of gas into liquids each day. The Ohio EPA says that if approval is granted, Ashtabula Energy would be permitted dump 1.6 million gallons of waste water each day into the lake, having “minimal impact on the water quality of the lake.”

Related: Low Oil Prices Have Silver Lining For Latin America’s Heavy Crude Producers

Pinto Energy proposed building the plant in 2013, but the company was soon bought by Velocys, a British company that moved its operations to Houston at the time to enter the U.S. market. Velocys says the project will mean 400 temporary jobs to build the plant, which should be completed by the end of this year, and result in 30 permanent jobs in Ashtabula.

And the project can grow with demand, according to Guy Dove, chairman of Pinto Energy. “The site we have is actually large enough to build facilities to total 7,000 barrels per day,” he said.

The company says it will use a chemical process called Fischer-Tropsch to convert natural gas into various liquid fuels that are more profitable – for example diesel, which is eight times more expensive than natural gas.

Ashtabula is perfectly situated for such a plant, Velocys CEO Roy Lipski said in a statement. “This highlights the unique opportunity presented by abundant Marcellus and Utica shale gas reserves, as well as the drive for energy security and cleaner fuels,” he wrote.

The Marcellus shale stretches from New York State, through Ohio, and down the Appalachian mountains. The Utica shale lies just west of the Marcellus shale, mostly in Ohio.

But this plant is an exception to the recent rule of energy companies abandoning projects – many of them far larger than the Ashtabula initiative – because of shrinking revenues caused by the 7-month-old plunge in oil prices.

On Jan. 15, the Spanish oil giant Repsol announced it was giving up oil and gas drilling off the Spain’s Canary Islands near the Moroccan coast because of a combination of environmental concern by the islands’ residents and the expense of exploring for oil at a time of low oil prices and revenues.

Related: Low Oil Prices Force OPEC Members To Rethink 2015 Budgets

Repsol said it would seal off an exploratory methane and hexane well more than 3,000 meters below sea level and drop plans altogether to conduct a second exploratory drilling.

This is only one of many energy projects that have been abandoned in recent weeks. For example, on Jan. 14, Royal Dutch Shell and Qatar Petroleum ended a 3-year-old plan to build a petrochemical plant in Qatar because the plunging price of oil has rendered the project unprofitable.

For the same reason Saudi Aramco, the Saudi Arabian oil giant, has delayed plans to spend $2 billion on a clean-fuels plant at its largest oil refinery in Ras Tanura, on the Persian Gulf coast not far from Qatar, according to Reuters.

By Andy Tully of Oilprice.com

More Top Reads From Oilprice.com:

• Oil Industry Withdraws From High Cost Areas
• Low Oil Prices Compounding Problems At Petrobras
• Oil Price Collapse Down To Broader Demand Factors