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Petrochem Industry Eyes Economic Growth from Shale Gas

The natural gas liquids (NGL) in shale gas offer the United States a "tremendous opportunity" to strengthen manufacturing, boost economic output and create jobs, according to a report by the American Chemistry Council (ACC).

The chemical industry relies on ethane, derived from NGLs, as a feedstock to develop thousands of products. In a recent analysis published by the ACC, researchers looked at the impact of a "hypothetical, but realistic" 25% boost in U.S. ethane supplies to the petrochemical sector.

To achieve the increase the researchers assumed that $16.2 billion in private investments would be made over several years in new plant and equipment for manufacturing petrochemicals, which in turn would lead to a 25% increase in U.S. petrochemicals capacity. The scenario also assumed that $32.9 billion would be invested by the chemical industry. Using that scenario, the ACC said the increase would generate:

"The scenario analyzed in this paper that considers a 25% increase in ethane is not merely a thought exercise," said the researchers. "New investments in petrochemical capacity to utilize this resource advantage are already being made by chemical companies. The assumptions are reasonable and are consistent with public announcements by companies such as Dow Chemical, Shell Chemical, LyondellBasell and Bayer MaterialScience among others."

Dow and a unit of Range Resources Corp. signed a memorandum of understanding in April for Range to deliver Marcellus Shale ethane to Dow's existing chemical operations in Louisiana (see Shale Daily, April 25). Also recently, Chevron Phillips Chemical Co. LP said it was evaluating plans to site a "world-class" ethane cracker and ethylene derivatives facility -- fed by shale gas reserves -- in the Gulf Coast region (see Shale Daily, March 29). Westlake Chemical Corp. also is planning to expand its ethylene capacity (see Shale Daily, April 7).

Just days ago Royal Dutch Shell plc also announced plans to build an ethylene cracker in the Marcellus Shale (see Shale Daily, June 7).

"Some of these investments are being made in areas of the country that have been hardest hit by declines in manufacturing, improving the outlook in economically depressed areas of the country," the report stated. "Further development of the nation's shale gas and ethane can drive an even greater expansion in domestic petrochemical capacity, provided that policymakers avoid unreasonable restrictions on supply."

Increasing ethane supplies also would indirectly support natural gas development, said the report.

"Because of the recent development of gas from shale formations, the additional supply has pushed down the price of natural gas," said researchers. "Natural gas is an important fuel for home heating and is a vital input to many U.S. manufacturers. Lower natural gas prices, however, also lower the return on investment for shale gas producers.

"Some shale gas formations, including the Eagle Ford and parts of the Marcellus, are rich in natural gas liquids. By providing a market for the co-produced natural gas liquids, ethane in particular, shale gas production remains economic."

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