By October 10, 2012 0 Comments Read More →

Shale gas bonanza could extend to other industries

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The shale gas boom could cut costs significantly for the chemical industry and ultimately benefit the apparel, electronics, machinery and other industries, according to a report released Tuesday.

The report by PricewaterhouseCoopers US suggests cheap natural gas liquids could even prompt some companies to move production back to the United States.

It already has spurred an estimated $15 billion in new investments in Texas chemical plants, according to Hector Rivera, president and CEO of the Texas Chemical Council.

Rivera said the rebound started as the nation began to recover from the recession.

“Here in the United States, it has been a game-changer and has created an opportunity for a lot of companies to make new investments in the United States, as opposed to overseas markets where natural gas has historically been cheaper over the last 10 or 15 years,” he said.

Anthony Scamuffa, U.S. Chemicals leader for Price-waterhouseCoopers, predicted that the effects of low-priced natural gas liquids will ripple through the manufacturing chain.

“As the U.S. chemical industry expands (natural gas liquids) 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 in a statement. “Not only could the abundance of (natural gas liquids) 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.”

The report, “Shale Gas: Reshaping the U.S. Chemicals Industry,” followed an earlier Price-waterhouseCoopers report that estimated shale gas could cut raw material and energy costs for U.S. manufacturing by as much as $11.6 billion annually by 2025.

The chemical industry uses natural gas liquids to produce products used in a number of manufacturing sectors, so lower costs for natural gas could mean lower costs for a wide range of other products, according to the report.

Pricewaterhouse-Coopers said specialty chemical companies are starting to feel the impact of lower natural gas and natural gas liquids prices and speculated that companies might look for longer-term sourcing relationships and partnerships with suppliers.

The report said manufacturers should see costs drop if they replace petroleum-based raw materials with products based on ethylene, which is derived from natural gas, a pattern it said would be repeated for other petroleum-based raw materials, including many used in building and construction.

Scamuffa noted that the extent of the shift would depend, in part, on public tolerance for expanded hydraulic fracturing, which is used to extract shale gas. Opponents of fracturing fear environmental damage from the process, which involves injecting water, sand and chemicals into a well to force oil and gas out of tight formations.

 

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Posted in: Daily News

About the Author:

The Louisiana Oil & Gas Association (known before 2006 as LIOGA) was organized in 1992 to represent the Independent and service sectors of the oil and gas industry in Louisiana; this representation includes exploration, production and oilfield services. Our primary goal is to provide our industry with a working environment that will enhance the industry. LOGA services its membership by creating incentives for Louisiana’s oil & gas industry, warding off tax increases, changing existing burdensome regulations, and educating the public and government of the importance of the oil and gas industry in the state of Louisiana.

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