Royal Dutch Shell Plc fraced half of the Marcellus wet-gas conundrum at press time, announcing it will build a 60,000- to 80,000-barrel-a-day ethane cracker. And, no big transportation deal is necessary: It will build it right there in Appalachia, in the midst of hundreds, and soon to be thousands, of 1,400-plus Btu wells.

The estimated $1-billion plant's site has not been selected, but West Virginia and Pennsylvania are both lobbying for the jobs. West Virginia Gov. Earl Ray Tomblin has been working on getting the ethane industry in his home state, creating the "Marcellus to Manufacturing" task force whose members include Triana's Henry Harmon, Northeast Natural's Michael John, Caiman's Jack Lafield and NiSource's Jim Crews.

Range Resources Corp., which pioneered the Marcellus play in 2007, got to work on finding a market for the gas liquids at about the same time. It estimates the wet-gas window of its 1.1 million acres could hold nearly a half-billion barrels. If the ethane is stripped out, the figure would double to some 900 million.

"And, then, if we can get better about where we land (our wells) and how we drill and complete, really, you're approaching 1 billion barrels," says Jeff Ventura, Range president and chief operating officer.

The ethane-to-market opportunity is not yet fully monetized, however. Range and fellow Marcellus wet-gas producers are expected to be making more than 120,000 barrels of ethane a day in a few years. Shell would use roughly half of that.

The other half may go to petrochemical plants on the Gulf Coast, via competing proposals by El Paso Corp., which contemplates converting an existing pipeline, and by MarkWest Energy Partners LP, which would ship off the Atlantic coast. The former could carry 60,000 barrels of ethane a day as is and several hundred thousand if modified; the latter, 50,000.

Another proposal is also by MarkWest and partner Sunoco Logistics Partners LP. It is to convert an existing Sunoco pipe to take ethane from Pennsylvania to petrochemical plants in Sarnia, Ontario, carrying 65,000 barrels a day.

The prize to both Marcellus producers and end users is great. If stripped, the ethane can fetch $8 per million Btu on the market, for example, compared with $5 for just dry gas. Meanwhile, ethane is turned into ethylene, which is made into polyethylene or plastic. To the end user, ethane is some 46% the price of crude oil, on a Btu basis, so it's cheaper to make plastic from ethane itself than from ethane derived from cracking crude oil.

"If you look at Asia and naphtha…they have become clearly the lowest-margin, highest-cost jurisdiction, with Europe being a close second," says Andrew Liveris, The Dow Chemical Co. chairman, president and chief executive. Dow, which is the world's largest plastics manufacturer, is already increasing its ethane-cracking capacity on the Gulf Coast as it is assured of new gas-liquids supply from the Midcontinent and South Texas' Eagle Ford plays. "But we're not stopping there," Liveris says. A firm-purchase arrangement with Range that is in the works "will give us access to the liquids from the Marcellus."

John Pinkerton, Range chairman and CEO, explains, "You have a global economy that's using naphtha. You have this huge push of 'How do I get off naphtha and get to ethane?'"

Range will also get 12% greater recovery of the propane that's in its wet gas, upon extracting the ethane. "So it's a plus, plus, plus and the story continues to get better…," Pinkerton says. In the liquids-rich window of Range's leasehold, it appears that the smallest-completion-type well—that is, eight frac stages on a 2,500-foot lateral—will make 5 billion cubic feet equivalent (Bcfe) of which 3.6 Bcf is dry gas or methane and 239,000 barrels are gas liquids. With a 3,500-foot lateral and 12 frac stages: 6.7 Bcfe or 4.1 Bcf of methane and 425,000 barrels of liquids.

The prospective buyers are impressed with the figures, Pinkerton says. "This is going to be a lot of ethane…At the end of the day, we'll get gas-plus for the ethane, which is something that we never thought would happen two years ago.

"We were hoping it would, but, now, it's clearly going to happen…It will have a big impact on our realizations and our margins and, obviously,…the rate of return."