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*UPDATE III* Shale Fueling America’s Chemical Industry

UPDATE III (11:25 am ET, 2/1/13):  This week, Methanex Corp. announced it would be moving a methanol plant from Chile to Louisiana to take advantage of America’s abundant supply of affordable natural gas.  As the Globe and Mail reports:

Methanex, which has plants in six countries, is one of a growing number of petrochemical companies locating manufacturing facilities in North America to take advantage of the booming supplies and low cost of natural gas.”

The company’s CEO, John Floren, also stated he expects to move a second Chilean plant to Louisiana in the coming years, which would of course mean even more U.S. jobs.

As forecasts by PricewaterhouseCoopers (PWC) find North America transforming into a “major, global, low-cost provider of energy and feedstocks,” today’s news from Methanex reconfirms the facts: Natural gas development from shale in the United States is a globally competitive force, and it’s putting American manufacturing back on top.

UPDATE II (5:07 pm ET, 12/13/2012): This week, the American Chemistry Council (ACC) released its “Year End 2012 Situation and Outlook,” highlighting a bright union in America’s economy: the chemical industry and natural gas. American Chemistry Council’s (ACC) chief economist Kevin Swift sums it up: “Following a decade of high and volatile natural gas prices that destroyed industrial demand and led to the closure of many gas-intensive manufacturers, shale gas offers a new era of American competitiveness that will lead to greater investment, industry growth, and employment.” And the evidence is already right in front of our eyes.   Dow Chemical Co.—a leader in America’s chemical industry—applied for a federal permit this week to build its largest ethylene plant in Freeport, Texas. (And as you can see here, ethylene is used in everything from shampoo to the tires on your car.) And according to Plastics and Rubber Weekly,  “chemical and related industries have announced $45bn in projects over the next few years.” Not bad for American business—and all thanks to inexpensive, job-creating, domestic natural gas.

UPDATE (5:39 pm ET, 11/15/2012): More good news for American manufacturing, thanks to shale.  From chemical plants relocating back to the United States, bringing jobs and opportunities along with them, to new major plant openings and expansions, natural gas development is revamping and expanding the American supply chain.  As a recent story by Steven Mufson at the Washington Post highlights, domestic shale development is “firing up an old-fashioned American industrial revival, breathing life into businesses such as petrochemicals and glass, steel and toys.”  The Post notes that manufacturers are planning “to invest as much as $80 billion” in new U.S. facilities and operations, which is due to the “massive competitive advantage the United States has with natural gas today,” according to Dow Chemical’s George Blitz. U.S. Steel – long a source of pride among hardworking men and women in the Rust Belt – added that affordable natural gas has allowed them “to realize important and significant cost savings.”

This one should really be read from start to finish, so be sure to check it out.

 —Original post, October 15, 2012

This one should really be read from start to finish, so be sure to check it out.

Back in December 2011, PricewaterhouseCoopers (PwC) released a report on the major impact shale development was having on American manufacturing. The report, “Shale Gas: A Renaissance in US Manufacturing?” highlighted how affordable, domestic supplies of natural gas will save U.S. manufacturers more than $11 billion per year over the next decade, create one million new jobs during that same period, and increase disposable income for each household in the United States by as much as $2,000 per year. Now, nearly a year later, PwC has released a new report, “Shale gas: Reshaping the US chemicals industry,” focused on the direct impact of shale development on North America’s chemical industry.

In addition to the natural gas that heats our homes and generates electricity, development often also yields valuable liquids such as ethane, butane, and propane. These “NGLs” (natural gas liquids) are used to make things like shampoo, the bumper on your car, and the sole of your shoe. So as natural gas production expands – thanks in no small part to proven technologies like hydraulic fracturing and horizontal drilling – NGL production also increases, spurring new growth in American manufacturing.

As PwC U.S. Chemicals leader Anthony J. Scamuffa highlights:

“As the U.S. chemical industry expands NGL conversion into a higher volume of downstream products, the positive impacts could flow through the value chain into other manufacturing sectors, particularly given that chemicals are used in an estimated 90 percent of all manufactured products.

“…Not only could the abundance of NGLs help drive reduced pricing for derivative products, it could also potentially drive domestic re-shoring activity and possibly bring about a favorable shift in the U.S. balance of trade as ethylene capacity comes on line.”

And the impact of this increased supply is being felt across the United States. Hector Rivera, president and CEO of the Texas Chemical Council, noted recently in the Houston Chronicle, “Low natural gas prices related to the shale gas boom have spurred an estimated $15 billion in planned expansions at Texas chemical companies.”

In Pennsylvania, Shell announced in April that it would be constructing a mulit-million dollar ethane cracker near Monaca, PA, a project that is estimated to create more than 10,000 permanent jobs, according to the American Chemistry Council.  And according to PwC, these types of investments are just the beginning.

To date, the U.S. chemicals industry has invested $15 billion based on the shale industry’s production of ethylene, increasing capacity by 33 percent. The result: affordable feedstock for America’s robust chemical and manufacturing sector and fuel for America’s economy.  And while ethane production has been historically fueled by the Middle East, North American shale development is redefining the supply-demand dynamic, putting America back in the lead. As PwC further explains:

“The Middle East ethane production chain is predominantly centered in Saudi Arabia, which has leveraged its historically low-cost raw material sources to become a global petrochemicals powerhouse. However, its newer ethylene production facilities rely on an ethane-butane mix, which yields higher-priced ethylene and other feedstock chemicals. These factors are serving to reduce the country’s historic competitive advantage.”

It’s clear that the economic and even geopolitical benefits of shale are being realized every day. In fact, a new report released Friday by a team of Yale University economic graduates shows that lower natural gas prices — a result of expanded shale development — saved consumers an estimated $100 billion in 2011. Amazingly, the report also found the economic benefits of shale gas drilling exceed the costs by an astounding 400 to 1.

Pretty convincing odds, and yet another reminder that shale development truly is a game changer for the United States.

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