New ACC Report Analyzes Hypothetical Ethane Supply Increase

The American Chemistry Council’s (ACC) latest report, “Shale Gas and New Petrochemicals Investment: Benefits for the Economy, Jobs and U.S. Manufacturing,” analyzes the impact a hypothetical but realistic 25-percent increase in ethane supply in the petrochemical sector could generate for manufacturing, the economy and the industry as a whole.

The report assumes a one-time $16.2 billion private investment over several years in new plant and equipment manufacturing petrochemicals. The report found this investment would create jobs and additional output in other sectors of the economy and also would lead to a 25-percent increase in U.S. petrochemicals capacity and $32.9 billion in additional chemical industry output.

In addition to direct effects, indirect and induced effects from these added outputs could lead to an additional $50.6 billion gain elsewhere in the economy. It would also create more than 17,000 knowledge-sensitive, high-paying jobs directly in the chemical industry, and another 165,000 indirect jobs elsewhere in the economy.

The added jobs created and further output in turn would lead to a gain in federal, state and local tax collections, about $4.4 billion per year according to the report.

The 25-percent increase in ethane scenario is not merely a thought exercise, the report says. New investments in petrochemical capacity to utilize the resource are already being made by chemical companies and are consistent with public announcements made by The Dow Chemical Co., Shell Chemical, LyondellBasell and others.

In addition to providing a productive and job-creating outlet for increased ethane supplies, the report states development of new technologies like cracking and hydraulic fracturing are also supporting natural gas development, thus pushing down the price of natural gas.

While new technologies have made shale gas and other nonconventional gas more economically feasible, the report says geological formations have been known for decades to contain significant amounts of natural gas. Over the past five years, several factors have combined to stimulate the development of shale gas resources. First was a new way of gathering natural gas from tight-rock deposits of organic shale through horizontal drilling combined with hydraulic fracturing.

Although these well stimulation techniques have been around for nearly 50 years, the report says the technology has significantly improved. With these innovations in natural gas drilling and production, the productivity and profitability of extracting natural gas from shale deposits became possible.

President Obama has also recognized shale gas’ importance to the overall economy and recently made an executive order calling for coordination in federal agency efforts related to unconventional natural gas resources. In a statement made by the ACC, the organization said it welcomes the president’s call to coordinate federal agency activities related to domestic shale gas in hopes it will grow the nation’s energy strategy and align with its newest report’s upbeat predictions.

“As [Obama’s] order stated, this resource ‘creates jobs and provides economic benefits to the entire domestic production supply chain, as well as to chemical and other manufacturers, who benefit from lower feedstock and energy costs,’” the ACC commented. “With shale gas poised to play an important and growing role in the nation’s energy strategy, appropriate regulations and policies will be critical.”

The ACC said it agrees “states are the primary regulators of onshore oil and gas activities,” and indeed many states are paving the way in developing robust regulations.

“Natural gas is important as a fuel and power source for American manufacturers, but to the chemistry industry, it’s much more,” the ACC continued. “We use ethane contained in natural gas as a raw material, or feedstock, for our products, which then go into 96 percent of all U.S.-manufactured goods. Natural gas and natural gas liquids such as ethane require separate infrastructure systems, and we encourage the administration to consider the implications as it coordinates policy.”

For more information or to read the full report, visit www.american chemistry.com or call (202) 249-7000.

BIC Magazine
Author: BIC Magazine, bicnews@bicalliance.com

This article was republished on this website with the permission of the Author.
To comment on this article please visit the original article.