The shale gas boom could potentially drive significant benefits to the U.S. chemicals industry, including decreased raw material and energy costs, said a new report released Tuesday. The report, titled "Shale Gas: Reshaping the U.S. Chemicals Industry", suggests that cheap natural gas liquids could prompt some companies to return production to the United States.
Before natural gas from shale can be transported and sold, impurities must be extracted. The by-products of this process, known as natural gas liquids (NGL), include hydrocarbons such as ethane, butane and propane. The chemicals industry uses NGL to produce derivative products that ultimately become raw materials for manufacturing sectors.
"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," said Anthony J. Scamuffa, U. S. Chemicals leader for services firm PwC, which released the report.
"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," he said.
Based on industry reports, PwC estimated that the U.S. chemicals industry has invested 15 billion dollars in ethylene production, increasing capacity by 33 percent. Ethylene is made from NGLs.
As these investments take hold, yielding more supply, the U.S. could become a major global low-cost provider of energy and feedstocks to the chemicals industry, PwC said.
An earlier report by PwC estimated that the potential impact of shale gas on U.S. manufacturing could enable U.S. manufacturers to lower their raw materials and energy costs as much as 11.6 billion dollars annually by 2025.