Study: Shale Gas Will Boost U.S. Manufacturing

Mark Green
Posted December 14, 2011

More good news from shale: A new study projects 1 million new jobs in the U.S. manufacturing sector by 2025 because of affordable energy from shale and the demand for products used to develop America’s vast shale resources. “Shale gas has the potential to spark a U.S. manufacturing renaissance over the next few years, boosting revenue and driving job creation,” the PricewaterhouseCoopers (PwC) study says.

In addition to jobs, the analysis supported by the National Association of Manufacturers finds other benefits from clean-burning natural gas from shale:

• Lower feedstock and energy costs could save U.S. manufacturers as much as $11.6 billion annually through 2025.
• Demand growth – This year, 17 chemical, metal and industrial manufacturers noted in filings with the Securities Exchange Commission that shale gas developments drove demand for their products – compared to none in 2008.

PwC:

“An underappreciated part of the shale gas story is the substantial cost benefit to manufacturers, based on estimates of future natural gas prices as more shale gas is recovered. Historically, there has been an indirect relationship between the level of energy prices, such as those for natural gas, and the level of domestic manufacturing employment, as manufacturers consume approximately one-third of all the energy produced in the United States. Consequently, this relatively abundant domestic energy source has the potential to drive an uptick in US manufacturing over the long term and create new jobs in the sector.”

Examples of investment decisions stemming from shale natural gas, according to PwC:

• Dow Chemical plans to build new ethylene unit on the Gulf Coast by 2017, restart a dormant ethylene unit in Louisiana by next year and construct new propylene unit in Texas by 2015 – all of which would capitalize shale gas as a feedstock.
• Formosa Plastics plans to spend $1.5 billion on an ethylene plant and downstream assets in Texas by 2015, partly due to the availability of shale gas feedstock.
• Chevron Phillips Chemical announced a feasibility study for an ethane cracker and ethylene derivatives facilities on the Gulf Coast.
• Bayer Corporation is talking about building an ethane cracker in the Marcellus shale region.
• U.S. Steel invested $95 million in an Ohio plant to help meet demand from shale gas extraction activities.
• Vallourec is spending $650 million on a new plant in Ohio to supply steel pipe for companies extracting shale gas.

The study’s release coincides with the American Chemical Council’s year-end and outlook assessment, which cites the role of shale natural gas in helping to expand chemical sector opportunities. ACC President and CEO Cal Dooley:

“The shale gas production boom is moderating natural gas prices and creating more stable supplies, which has allowed U.S. chemical manufacturers to become more competitive with producers abroad.”

Good news for shale, great news for American workers and the economy.