Rising natural gas production has lured more manufacturers back to the United States with the promise of cheaper electricity and feedstock.
PHILADELPHIA — America's booming natural gas production has drawn countless manufacturers back to the United States, experts said Thursday at Shale Gas Insight 2012.
Low natural gas prices have lingered due to the glut of the commodity, making the country an attractive market for manufacturers once again.
“Anyone that uses a lot of electricity, and anyone that uses natural gas as a feedstock, will want to be back in the United States of America,” said Barry Smitherman, chairman of the Texas Railroad Commission.
Martha Gilchrist Moore, senior director of policy analysis and economics at the American Chemistry Council, said a 2011 study showed the game-changing potential of natural gas and natural gas liquids.
Ethane, a natural gas liquid, is a key ingredient in many petrochemical products like plastics and other synthetic fibers.
“One of my colleagues refers to it as the secret sauce of the chemical industry,” which is the nation's largest natural gas user, Moore said.
She said the American Chemistry Council study showed a 25 percent increase in the ethane supply would result in $132 billion in new economic output after an investment of $16 billion. It would also create more than 40,000 new jobs for the chemical industry and its suppliers.
Moore said the U.S. likely will reap more benefits than the study indicated after hearing IHS Consulting's Andrew Swanson predict a 40 percent increase in natural gas liquids production by 2020.
Swanson, managing director of business development for IHS, said low-priced natural gas and natural gas liquids are attractive to manufacturers seeking cost certainty. Ethane, propane and butane are key feedstocks for many of them.Chemical companies in the U.S. can “crack” ethane to turn it into ethylene rather than relying on more expensive naphtha. Swanson said that shows the “fundamental competitiveness” this country enjoys in that market.
Swanson said lower prices for natural gas liquids have led to a “flood” of announcements in the chemical industry, with companies planning to add 11 billion tons of new ethylene production capacity.
Most of those projects are located along the Gulf of Mexico because of pre-existing infrastructure investments there, but Shell has announced plans to build an ethane cracker in western Pennsylvania.
Alan Walker, secretary of the Pennsylvania Department of Community and Economic Development, said that was exciting news for the state, with the potential for additional facilities in the region because of its abundant natural gas resources.
“If we use it right and manage it right, we're looking at at least a 100-year supply here in Pennsylvania,” Walker said.
Natural gas may be more commonly recognized as a versatile fuel that can be used for electricity, heating and transportation. It also can be used directly by manufacturers, Walker said.
“It can be the dawn of a new industrial revolution, but only if we allow the industry to develop,” he said.
Swanson said rising natural gas production also offers lucrative opportunities for companies that use butadiene or specialize in gas-to-liquids processes that turn natural gas into gasoline or diesel fuel.