Shale Gas Insight Conference 2012 Day 2: The Resurgence of Manufacturing Spurred by Natural Gas Liquids
This panel focused on the direct benefit that gas production is having on the US manufacturing industry. The panel noted that chemical manufacturing is an important piece of the value chain for all manner of industrial and consumer goods. Energy prices have a huge impact on chemical manufacturing. Oil prices in the US are rising, but natural gas prices are falling, prompting an upsurge in domestic chemical manufacturing. Natural gas liquids also produce important feedstocks for the chemical industry. These include propane and ethane. The cash cost of US ethylene from ethane is $1000 per ton lower than producing the same amount in Asia. As a result, almost a dozen new ethane cracker facilities are now proposed in the Marcellus Shale and elsewhere. US ethylene producers are expected to export increasing amounts over the next 15 years. The level of chemical production capacity is expected to rise 40% in the next 10 years.
The chemical industry is the largest domestic user of energy, after refining, in the US. It uses energy both for production and as feedstocks. The largest feedstocks are hydrocarbons, including wet and dry gasses. Ethylene, a product of ethane cracking, is used to make thermal plastics (PVC, Polyvinyl Chloride and related products). Between 2005 and the present, ethylene costs in the US have dropped dramatically. 10 years ago, building an ethane cracker in the US would have been thought laughable. Today, there are more than a dozen plants in the planning stages. A 25% increase in ethane supply is predicted to result in $132 billion in total US economic output, including more than 400,000 jobs. This will also include $4.4 billion in state, federal and local tax revenue.
These effects are being felt particularly in Pennsylvania. In 1920, Pennsylvania was at the center of energy production. That advantage disappeared by mid-century. Today, Pennsylvania is home to the second largest energy reserve by BTU value in the world. In 5 years, Pennsylvania went from importing 40% of its natural gas needs to being a net natural gas exporter. Pennsylvania can be a model of smart, sustainable economic development. Pennsylvania is committed to working with environmental groups to make sure that the future development of these resources is done in a safe manner.
Just yesterday, the federal government announced a $15 million grant to be used by community colleges to train the natural gas work force in Pennsylvania.
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