On a clear but windy July day in Qidong, China — about 40 miles outside of Shanghai – a crowd of dignitaries, innovators, business men and women, big thinkers, and well-wishers gathered near the water.  They were there for a naming ceremony that would also serve as both a culmination, and a kick-off. 

The culmination was the result of over a billion dollars and four million man hours – the results of which were docked in front of the crowd, two massive new ships that are literally in a class all their own: Dragon Class, a new designation for an entirely new design and a brand new undertaking. That undertaking is the kick-off the crowd was also there to celebrate – because as the ships set sail, first to Korea, and later to Marcus Hook just outside of Philadelphia, PA – a new era in shale gas will have begun.  It’s a story that is emblazoned on the side of each ship in giant letters, the first one reading “Shale Gas for Manufacturing”, the second “Shale Gas for Chemicals”.  And like the pioneering of the Marcellus in 2004, it’s a story that can’t be told without Range Resources.  

Range’s Senior Vice President of Corporate Development Chad Stephens, who is now retired, was in Qidong for the celebration. “It was a great day, and a big international affair. And I have to tell you, when I got off the bus and actually saw the two ships nose to nose at the dock, I thought ‘man, these guys know what they’re doing.’ It was a thrilling day and very gratifying given the amount of general market skepticism when we first announced the project.”

An understandable reaction, as Chad had been part of the team that worked diligently, for years, to put together a deal that would ultimately result in a unique partnership between Range Resources, MarkWest, Sunoco and a European chemical company called INEOS. Today, INEOS is a global manufacturer of petrochemicals, specialty chemicals and oil products, with sales of around $54 billion. But in the early days of negotiations with Range, they were less well known than some of the other international chemical giants. 

Vice President of Marcellus Development Curtis Tipton was also part of the team that worked on the deal. “To understand how the INEOS deal came together, you have to go back several years to the point where we realized we had what came to be referred to as ‘the ethane issue’.”

Chad elaborates, “We recognized our acreage in Washington County was going to be wet. And that gas would need to be processed.”  

Fortunately, as Curt explains, “We had some time to solve this problem.” He smiles.  “A problem that became an opportunity.” 

There were some major hurdles that had to be cleared first though, and one of the biggest was doubt about the Marcellus. “We had to convince folks the Marcellus was a serious play, and our ethane was a contender,” says Curt, “The team made a lot of calls, and a lot of people told us we were nuts. They don’t think so now,” he laughs. “We also had to do a thorough run down on all of our options for moving ethane. Can you rail it? Ultimately that answer was no. Can you barge it? That turned out not to be a great option either. The best way to move ethane – is by pipeline.” 

The limitations of the product also put limitations on who Range could sell it to. “There’s only one thing you can do with ethane,” explains Chad.  But that one thing you can do is a critical component of modern living.  “It’s a building block for all plastics.”

As the team was exploring solutions to Range’s “ethane problem”, the European chemical company Range would ultimately partner with was experiencing some problems of their own. While in the United States it was becoming clear that the Marcellus held an incredibly rich supply of natural gas, the team at INEOS was watching their own supply of gas from the North Sea in Scotland dwindle. And they faced volume restrictions in Norway that would have made it difficult if not impossible for the company to continue normal operations at their cracker plants in Europe.  Hundreds, if not thousands, of jobs were at stake – along with billions of dollars in potential lost revenue. 

INEOS needed natural gas. Southwestern Pennsylvania had it. But the volumes the European company needed to supply its cracker plants in Grangemouth, Scotland and Rafnes, Norway were far beyond any amount of ethane that had ever been shipped before. Transporting that amount of product would require a transatlantic pipeline – a literal impossibility. Transport by ship was the only option but at that time, it too was impossible – there was no ship or fleet in existence that could transport significant volumes of ethane that far. It had never been done. And many said – it couldn’t be done. 

There was also the issue of the location of the gas in southwestern Pennsylvania. It wasn’t near a port. It was in fact 300 miles away from the coast.  

Mariner East

For hundreds of years, transporting goods from one end of Pennsylvania to the other has been an important economic goal for American companies. And for much of that time, a significant barrier known as the Allegheny Mountain Range hasn’t made it easy. In the mid-1800’s – an extraordinary engineering accomplishment known as the Allegheny Portage Railroad linked the eastern and western sections of the state’s canal system – and reshaped the economic destiny of Pennsylvania. In 2015, that destiny is being reshaped once again, with another connector — this one known as Mariner East.

But before there was Mariner East, there was its pipeline precursor: Mariner West. “We kept making calls about our ethane to different companies. And getting a lot of ‘no’s’. But finally, we got some traction with a company called NOVA. I ended up flying to Calgary, and it became clear they were interested in our product,” explains Curt. Ultimately – Range, MarkWest, Sunoco and NOVA were able to put together a deal, “and Mariner West was born.” With Mariner West, Range would begin exporting ethane to Canada. 

In the meantime, the team was still making calls. At the recommendation of another chemical company – Range contacted INEOS and negotiations began.

A primary issue that had to be resolved was transporting the ethane from southwestern Pennsylvania to a port in Philadelphia. There was an existing pipeline in place, but it was set up to move refined product east to west. Once again, MarkWest, Sunoco and Range were at the table, this time with INEOS. There was a way to make the pipeline that would become Mariner East work – but it would need the right terminal to handle the ethane port side. 

Marcus Hook

For 110 years – a busy east coast oil and gas processing site known as Marcus Hook operated alongside the banks of the Delaware River. In 2011, changing market conditions led to a shut-down of the more than a century old refinery.

That closed refinery was the solution that Range, INEOS and their partners were seeking. A deal was reached to bring the shuttered site back on line, and in the three-plus years after Marcus Hook closed its doors, Sunoco has invested billions of dollars to create a world classchemical production, gas storage and distribution center. New dock facilities and storage tanks will enable the INEOS fleet of Dragons ships to be loaded with cargo that came from Range wells, and will ultimately be routed to Europe.

When the plan was first announced in 2012, United States Senator Pat Toomey said, “I’m pleased to see Pennsylvania take a leading role in securing our domestic energy future. Connecting Delaware County to Western Pennsylvania’s Marcellus Shale development will help support good-paying jobs in our Commonwealth. [This] announcement is an important step in ensuring America’s energy independence and expanding its role as a global energy exporter.”

More recently, a 2015 study released by Philadelphia-based Econsult Solutions, Inc., indicated that Sunoco Logistics’ pipeline infrastructure projects, Mariner East and the Marcus Hook Industrial Complex, will generate nearly $4.2 billion in economic activity in Pennsylvania, support an estimated 30,000 construction jobs, and generate nearly $62 million in new tax revenues to the Commonwealth. 

Insight & Inginuity

With contracts in place, and a means of getting ethane to port, the ships that would transport the ethane still needed to be built. For that enormous task, INEOS reached out to Danish fuel and shipping company Evergas. As one of the world’s leading seaborne transporters of petrochemical gases and natural gas liquids – Evergas understood perhaps better than anyone else what it would take to transport ethane in the quantities sought by INEOS over the distances required. Clearly, the vessel needed to be large, with storage capacity to match. However, if they went too big, it could take too long to fill the tanks, resulting in lost time better spent en route to the ship’s destination. They also had to be able to dock the ships at existing ports in Grangemouth and Rafnes. With those factors in mind, a decision was made to build the ships with a capacity of 27,500 cubic meters, and the capability to carry a range of products, including: ethane, propane and LNG.

Prior to transport, ethane has to be supercooled to -90°C (-130°F). Previously, at that temperature, it had only been shipped on small vessels on much shorter routes. Taking significantly larger quantities across the Atlantic Ocean presented a new challenge. According to Evergas Operations Manager Hans Weverbergh, “There were no ships in the world that had pressurized tanks that could carry this amount of ethane.  It was something that had never been done before.”

INEOS also wanted the Dragon Ships to be able to run off of their cargo of ethane – another design challenge. In the end, the ships were designed to be run on either diesel, LNG, or the ethane they transport – and the fuel source can be changed instantly without any loss of speed or power. In gas mode, the engines produce 25% less CO₂ and 99% less sulphurdioxide. 

Once Evergas completed the design, the construction of the ships was awarded to Sinopacific Offshore and Engineering in China — one of the largest ship builders in the world that specializes in high technology products for the oil and gas industry.  In all, more than 5,000 people and 2-million man hours were needed for the construction of the Dragon Ships. 

In front of the crowd of celebrants in Qidong – the new Dragon Ships were officially named. The JS INEOS Insight carries the slogan, “Shale Gas For Manufacturing” along its side; the JS INEOS Ingenuity proudly bears “Shale Gas For Chemicals”. In 2014, INEOS contracted with Evergas for an additional six vessels: Intrepid, Inspiration, Innovation, Intuition, Invention and Independence.

Jim Ratcliffe, INEOS founder and chairman is gratified to see the project moving forward, and excited about the future. “We’re going to move more than 40,000 barrels of gas a day, every day of the year, for fifteen years, from the US to Europe. Any way you look at it, this is an extraordinary achievement.”

That sentiment is shared by Chad, Curt and the rest of the Range team, as a deal that took years to put into place is finally coming to fruition.  As Chad looks back, he is proud of the team that continues to work so hard. “There was a lot of industry skepticism, people saying ‘you can’t do it’. But we were optimistic, and we have a great partnership with INEOS. They’ve done everything they said they were going to do and more.  It’s been a real global collaboration, and it brings such credibility and validity to Range. We’ll be the first company to export ethane from the United States to Europe.  Not one of ‘the big guys.’ It’s Range. That’s huge.” 

President, Chairman and CEO of Range Resources Jeff Ventura credits a team of people, working together on an effort unlike any other. “It was an incredibly creative solution to what was at one time viewed as a problem – what to do with our ethane.  In Texas and in Oklahoma, there was infrastructure in place in to process wet gas.  When we were getting started in Pennsylvania, there wasn’t. So for the team to work so hard to come up with this innovative plan that not only benefits Range, but is also creating jobs in Pennsylvania and has global impact – it’s incredible. And as we’re about to see it launch, it’s a win for all of the companies involved, for consumers across the globe, for landowners and workers. It’s a story that exemplifies challenges overcome.” After the naming ceremony, the ships were slated to sail to Korea, for additional testing of each vessel’s capabilities. Once cleared, the ships will sail to Marcus Hook; and when that facility is fully operational, it will take 24 hours to load the ships with natural gas.  At high tide the following day, with their American cargo in place, the JS Ingenuity and JS Insight will depart for Europe. That first shipment of ethane gas from a Range Resources well is slated to be delivered to a cracker plant in Rafnes, Norway later this year.