New ACC Study: Natural Gas Advances Chemical Industry’s Competitiveness, Investments

This week, yet another study was released underscoring the far-reaching benefits of clean, abundant American natural gas. Authored by the American Chemistry Council (ACC), the report examines how “Abundant supplies of shale gas have transformed America’s chemical industry from the world’s high-cost producer five years ago to among the world’s lowest-cost producers today.”

The report, entitled “Shale Gas, Competitiveness, and New U.S. Chemical Industry Investment – An Analysis of Announced Projects”, highlights and examines ways in which the affordable cost of natural gas from shale plays enhances American competitiveness, job creation and industry investments all while lowering our national trade deficit. ACC President and CEO Cal Dooley concludes, “The United States has become a magnet for chemical industry investment, a testament to the favorable environment created by America’s shale gas as well as a vote of confidence in a bright natural gas outlook for decades to come.”

Here are key excerpts of the new study:

  • Access to vast, new supplies of natural gas from previously untapped shale deposits is one of the most exciting domestic energy developments of the past 50 years. After years of high, volatile natural gas prices, the new economics of shale gas are creating a competitive advantage for US manufacturers, leading to greater investment, industry growth, and jobs.
  • Growth in domestic shale gas production is helping to reduce US natural gas prices and create a more stable supply of natural gas and ethane.
  • Chemical companies from around the world have announced plans for a significant number of new projects to build and expand their shale-­‐advantaged capacity in the United States. Through the end of March 2013, nearly 100 chemical industry investments valued at $71.7 billion had been announced. The majority are being made to expand production capacity for ethylene, ethylene derivatives (i.e., polyethylene, polyvinyl chloride, etc.), ammonia, methanol, propylene, and chlorine. Much of the investment is geared toward export markets, which can help improve the US trade deficit.
  • Roughly half of the announced investments to date are from firms based outside the U.S. The fact that such large numbers of foreign-­‐owned companies are choosing to source their chemistry in the United States is unprecedented in recent history, and a testament to the value and affordability of America’s shale gas and ethane supplies.
  • The U.S. is poised to capture market share from the rest of the world, and no other country or continent has as bright an outlook when it comes to natural gas.
  • Shale gas offers the United States an enormous opportunity to become more competitive internationally, grow our economy, and create jobs.
  • A new competitive advantage has emerged for chemical manufacturing in the United States as vast new supplies of natural gas from largely untapped shale gas resources, including the Marcellus along the Appalachian mountain chain, are leading to massive capital investment and expansion of the US chemical industry. With the development of new shale gas resources, US industry is announcing expansions of capacity, reversing a decade of long decline and providing opportunities for new jobs at a time when the United States is facing persistent high unemployment.
  • The US chemical industry is the largest industrial consumer of natural gas for fuel and power and also for feedstock. The economic impact of the additional production in the US chemical industry invigorated by improved competitiveness resulting from an increase in the availability of low cost natural gas is game changing.
  • Based on actual project announcements through March 2013, the US chemical industry is expected to spend at least $71.7 billion in private capital investment on new plant and equipment by 2020, to capitalize on the renewed competitiveness brought about by the shale gas revolution. Further, we expect that additional unannounced investment in chemical capacity is likely to occur. As much as $82.4 billion may be invested in new chemical industry capacity by 2020.
  • The availability of low priced natural gas improves US industry competitiveness. Lower natural gas prices mean lower input prices for major US manufacturing industries. Leading industries, including aluminum, chemicals, iron and steel, glass, and paper, are large consumers of natural gas and thus, benefit from shale gas developments.
  • ACC found a tremendous opportunity for shale gas to strengthen US manufacturing, boost economic output and create jobs. One of the industries clearly benefiting is plastic and rubber products, and this industry will feature strong growth and absorb much of the incremental gains in chemical industry output arising from the shale gas-­‐induced renewed competitiveness.
  • Because of shale gas, the US is among the low-­cost chemical producers worldwide. As a result, capacity utilization rates for the new investments are expected to remain high, and the new investments are expected to produce $66.8 billion in new chemical output. The additional $66.8 billion (2012 dollars) in US chemical industry output would directly generate roughly 46,000 high-­paying,desirable jobs in the chemical industry. … In addition, the increased competitiveness arising from shale gas and expanded output by the US chemical industry would generate purchases of raw materials, services, and other supplies throughout the supply chain. Thus, through indirect effects, another 264,000 supply chain jobs would be supported by the boost in the output of the chemical industry.

Click HERE for the press release, HERE for the full study, and HERE for the report fact sheet.

Also this week, the Bipartisan Policy Center released a report, “New Dynamics of the U.S. Natural Gas Market, which found that exporting and an increased use of natural gas are both unlikely to generate domestic price increases.

Here are some of the key findings:

  • The United States has ample domestic supplies to meet future demand for natural gas without significant price increases.
  • Liquefied natural gas (LNG) exports are unlikely to have a large impact on domestic prices.
  • The price of U.S. natural gas will influence LNG export levels far more than LNG exports will influence domestic prices.
  • Increased natural gas consumption in the future will be primarily driven by overall economic growth and increased demand in the electric power and industrial sectors.
  • The industrial sector could be a major source of new demand for natural gas if projected growth in the U.S. manufacturing base is realized.
  • Natural gas vehicles stand to make significant gains in market share and vehicle miles traveled by 2035.
  • In the electric power sector natural gas leads, but renewables also play a significant role.
  • Analysis shows that the United States is uniquely positioned to take advantage of the economic, environmental, and energy security benefits of the country’s large natural gas resource base.
  • Natural gas resources have the potential to create new market opportunities for expanded natural gas use in ways that will grow the economy and improve the environmental performance of the U.S. energy system.

Click HERE for the press release, and HERE for the full study.

Fact-based reports like these play a vital role in further understanding the broad-based benefits associated with the safe production of our domestic natural gas resources. Please visit LearnAboutShale.org for additional information on natural gas development in Pennsylvania and join the online conversation by using #LearnAboutShale on Twitter.