In Texas, natural gas and American chemistry continue to drive economic growth

Oil and gas drilling have loomed large in the Texas economy for decades. Now the production of low-priced natural gas from shale is transforming the state’s petrochemical industry and creating a surge in the exports of ethylene and plastics.

Here’s what a recent report by Jesse Thompson of the Federal Reserve Bank of Dallas concluded:

A highly profitable petrochemical industry has reemerged in Texas from the boom in U.S. shale oil and gas exploration, creating an internationally competitive sector that can produce a variety of products including plastics at a lower cost. . . The state is reaping economic gains from the petrochemical resurgence that include increases in construction, jobs and exports.

Texas, home to the Barnett and Eagle Ford Shale formations, is the largest chemical producing state in the country— supporting over 70,000 state jobs and $145 billion in revenue. In 2013, the Eagle Ford Shale could produce “51 million oil-equivalent barrels of natural gas,” contributing to the total Texas oil production of 712 million barrels.

Increased supply equals lower prices—an attractive incentive for companies in the industry.

The U.S.—with Texas at the forefront—has become a highly cost-effective place to invest in new petrochemical plants. . . . Ethylene capacity is poised to increase almost 33 percent by 2017, pending completion of all new plants, expansions, enhancements and restarts of shutdown facilities that have been announced in the U.S.

SOURCE: Report, Federal Reserve Bank of Dallas

Ethylene is a feedstock for the petrochemical industry. With production on the rise, the United States enjoys an opportunity to become more competitive on a global scale, which translates into more exports.

According to the report, Texas accounted for “17 percent of all U.S. exports in 2011, including 24 percent of chemicals and 12 percent of plastics and rubber products—categories that include resins for pipes, toys, plastic cups and antifreeze. . . . Petrochemicals will become an increasingly important component of already expanding Texas imports.”

SOURCE: Report, Federal Reserve Bank of Dallas

An increase in exports and production is not only good for Texas but for the entire region.

“Projects capitalizing on the shale boom will drive a wave of construction as plants are built and pipeline infrastructure and storage capacity are expanded along the Gulf Coast over the next five years,” the report noted.

Such projects will provide high-paying jobs in diverse industries, boosting the economy on the whole.

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