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As a result of abundant, affordable shale gas, America’s chemical manufacturers enjoy a “profound and sustained” competitive advantage that will dramatically boost industry output and create almost 318,000 jobs by 2025, according to a new IHS report.
The American Chemistry Council lauded the report’s findings that the U.S. chemical industry will be the “primary beneficiary” of lower cost energy supplies. ACC President and CEO Cal Dooley said in a statement:
[quote]Natural gas supply growth is leading to unprecedented investment and capacity expansion in the United States, in stark contrast with other areas. We are truly the bright spot around the world.[/quote]
By 2025, the shale gas advantage will encourage investment of as much as $100 billion in U.S. chemical and plastics facilities and boost industry capacity by almost 89 million tons, with additional output of $51 billion due to unconventional energy, up from $6.8 billion in additional output for 2012, according to IHS.
Robust supplies of natural gas liquids (NGLs), especially ethane, a principal feedstock for basic chemicals and plastics making in the U.S., give the chemical industry its competitive edge. Overseas companies mostly rely on more expensive oil-based naphtha.
IHS projects ethane supplies to quadruple by 2025. Because NGLs, in particular, are growing so rapidly, feedstock prices have dropped dramatically. The abundant supply projections from IHS build confidence in a sustained advantage for America’s chemical industry.
To be sure, the chemical industry’s prospects were “bleak” before shale gas came along, said Mark Wegenka, managing director of IHS’s chemical consulting business. “We’ve witnessed a complete turnaround” as the industry attracts “significant domestic and foreign investment,” he added.
A recent ACC report confirms that chemical industry investment is already underway. As of September, 126 chemical projects worth $84 billion in proposed capital investment have been announced, with 54 percent coming from companies based overseas.
Unconventional supplies of shale gas and oil will drive manufacturing growth beyond the chemical sector. Improving cost competitiveness will lead to increased U.S. industrial production equivalent to $258 billion in new manufacturing output in 2020 and $328 billion in 2025.
But the rosy projections could remain unfulfilled. Government regulation imposing restrictions on the production of shale gas “could slow or reverse the manufacturing renaissance,” IHS cautioned. The chemical industry alone could forgo as many as 289,000 jobs if production of shale gas is limited, the report said.
ACC has told Congress that appropriate government policies are required to ensure the U.S. capitalizes on the shale gas opportunities detailed in the IHS report.
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