Drilling & Fracturing
America’s chemical industry can benefit from shale development
Shale development could ultimately be extremely beneficial for American manufacturing. In fact, America’s natural gas could save U.S. manufacturers a lot of money in different areas. Last year, PricewaterhouseCoopers (PwC) reported that our affordable, domestic natural gas could save billions of dollars each year for the next 10 years, as well as create over 1 million new jobs.
Their report, entitled “Shale Gas: A Renaissance in US Manufacturing?” also stated that disposable incomes could increase, too, for each U.S. household.
It has been less than a year since their report from December 2011, but PwC has released another report. “Shale gas: Reshaping the US chemicals industry” focuses on how shale development directly impacts the chemical industry in the U.S.
Energy In Depth recently reviewed the new PwC report and noted that besides from generating electricity and heating residences, natural gas development “yields valuable liquids such as ethane, butane, and propane.” Interestingly, these natural gas liquids (NGLs) are responsible for making many products, like car bumpers and shoe soles. As Energy In Depth explains, “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,” a good thing for our economy.
In the new PwC report, they explain how the expansion of natural gas production can be beneficial in multiple ways: “Given the law of supply and demand, increases in ethylene-based capacity could yield a decline in chemicals pricing. Since chemicals are used in an estimated 90% of all manufactured products, lower chemicals prices could bring about a reduction in costs for US manufacturers.”
In addition to reduced costs for U.S. manufacturers, PwC believes it is possible that expensive materials like metal and glass could ultimately be substituted for chemical products. Plus, complex manufactured products could even be partially substituted for chemical products, also. “While today automobiles have a 20% chemical content,” PwC said in their report, “that percentage could rise as some manufacturers reengineer parts to increase chemical content, thereby decreasing weight and costs.”
The report goes on to say that an abundance of NGLs 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.” It is interesting to note that in Energy In Depth’s review of the PwC report, they state, “economic and even geopolitical benefits of shale are being realized every day.”
Fuel Fix’s blog, anchored by business reporters from the Houston Chronicle, recently commented on an article authored by the Yale Graduates in Energy Study Group, which was published in Oil & Gas Investor in October. Fuel Fix calls the report another to add to the “growing number that say shale gas is an economic boon to the United States.” They also say that the report predicts “shale gas drilling would cut costs significantly for the chemical industry and ultimately ripple through the rest of the manufacturing chain, even prompting some companies to move production back to the United States.”
Expanded shale development is also responsible for lower natural gas prices, which creates a chain effect of benefits. Fuel Fix quoted Hector Rivera, president and CEO of the Texas Chemical Council, regarding this topic: “Low natural gas prices related to the shale gas boom have spurred an estimated $15 billion in planned expansions at Texas chemical companies.”
All in all, shale development and the expansion of natural gas production offer a lot of growth for U.S. manufacturing, and America’s chemical industry. Fuel Fix concludes from the Yale Report, “the economic benefit of shale gas drilling exceeds cost to the community by 400-to-1.”