Study: Marcellus, Utica Production Gives Appalachian Manufacturers Advantage

A new petrochemical manufacturing facility in the Appalachian Basin will be four times as profitable to similar projects along the Gulf Coast, a new report released yesterday from IHS Markit concluded. While Shell Chemicals’ ethane cracker – currently under construction in Beaver County – is the first major petrochemical facility to be built outside the Gulf in more than two decades, this latest IHS report, commissioned by Shale Crescent USA, highlights the “significant financial advantage” that “locally produced low-cost ethane” delivers for Appalachian manufacturers.

Last year, IHS released a similar report concluding the Appalachian Basin can support up to four additional ethane crackers. As MSC’s Dave Spigelmyer told the Business Times then, “Pennsylvania’s world-class natural gas resource base has the potential to fundamentally reshape our near- and long-term manufacturing potential.”

Here are the report’s key takeaways. Click HERE to download the executive summary.

Key Takeaways:

“The Marcellus and Utica shale plays are some of the largest natural gas resources in the world and underlay the Shale Crescent USA region of Ohio, Pennsylvania, and West Virginia. IHS Markit forecasts that this region will supply 37% of the nation’s natural gas production by 2040.”

“The findings conclude there will be a significant financial advantage for an ethylene/polyethylene investment in the Shale Crescent USA region compared to a similar investment on the US Gulf Coast. An ethylene project in the Shale Crescent USA has a comparative advantage because of its access to ample supplies of locally produced low-cost ethane, which leads to a very competitive manufacturing cost of ethylene and subsequently polyethylene.”

“This advantage is augmented because the Shale Crescent USA region is in close proximity to over two-thirds of US polyethylene consumption.”

While this report, along with many others, demonstrate the generational manufacturing jobs opportunity ahead, this is another reminder for lawmakers to reject higher taxes and burdensome regulations that drive away job-creating investment.

As the Beaver County Times reported:

The report also received praise from the Marcellus Shale Coalition, which for years has worked to promote the economic benefits of the shale play beneath western Pennsylvania.

David Spigelmyer, president of the coalition, said Tuesday that the “world-class resource” below our feet “has the potential to usher in a wave of new, long-term manufacturing opportunities.”

He also called on state lawmakers to reject a proposed severance tax on natural gas drilling across Pennsylvania.

“While it’s an exciting time for our region, reports like this should serve as a reminder to policymakers that we need common-sense policies that attract — rather than discourage — job-creating investments into our region,” he said.