PwC:Expansion of Shale Gas Market Bolstering Outlook for US Chemicals Industry

By Rob Starr, Content Manager, Big4.com

According to a new report released today by PwC US titled, Shale Gas: Reshaping the U.S. Chemicals Industry,  the expansion of the shale gas market could potentially drive significant benefits to the U.S. chemicals industry, including decreased raw material and energy costs. Major oil and gas companies and upstream commodity industry participants are evaluating their business models and actively moving forward to take advantage of emerging shale gas opportunities.  Some are considering whether to restart mothballed assets, invest in green field projects, form strategic alliances, and expand and upgrade existing assets. Many of these companies are also executing large capital projects, identifying engineering and construction resources, and establishing strategic sourcing agreements with NGL providers.

Before natural gas from shale can be transported efficiently and sold commercially, 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 chemical industry uses NGL’s to produce a variety of derivative products that ultimately become raw materials for multiple manufacturing sectors. In the case of ethane, they convert it to ethylene — the most significant single chemical in terms of volume and value — and then a range of downstream products.

Anthony J. Scamuffa, U.S. Chemicals leader for PwC comments:

“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,” he said. “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.”