You see, ethane production has more than tripled in the past decade – from roughly 600,000 barrels per day (“bpd”) in 2008 to more than 1.9 million bpd today. Thanks to this abundance of supply, U.S. chemical makers pay some of the lowest costs on the planet... Before the shale boom, a gallon of ethane typically ranged from $0.80 to $1. But since 2012, the price of ethane has generally stayed between $0.20 and $0.40 per gallon. Today, it costs a little more than $0.20 per gallon – near the lowest level in more than a decade. These record-low prices have helped chemical makers overcome higher costs for American materials and labor. And those companies have seized this opportunity... Since the prices of ethane and other NGLs started falling in 2012, roughly $200 billion has been committed to chemical projects in the U.S., according to the American Chemistry Council (“ACC”). U.S. Department of Commerce data show the chemical industry’s share of the country’s total manufacturing sector soared from 18% in 2011 to 45% in 2017. In other words, a significant chunk of U.S. manufacturing can now be traced to the shale revolution. And with so much supply, this trend shows no signs of slowing down... By the end of next year, the U.S. plans to add 8.7 million metric tons of petrochemical production capacity. Ethylene plants will make up more than two-thirds of this new capacity. Based on U.S. Department of Energy estimates, ethane-based petrochemical investments will generate $716 billion
in revenue growth for the U.S. economy between 2018 and 2040. A massive, multidecade American manufacturing boom... Chemical makers gain an edge with lower costs, so they want to build processing plants near the cheapest source of ethane. Historically, that led these companies to the Gulf Coast because of all the oil and gas in states like Texas, Louisiana, and Oklahoma. From 2004 to 2016, every new ethylene plant was built in either Louisiana or Texas. Today, the Gulf Coast is home to more than 95% of U.S. ethylene capacity. But the shale revolution has upended the balance of power in America’s energy landscape. And now, the hard-hit Rust Belt section of the country is getting another chance to thrive. If you’re looking for a steady supply of NGLs, the Rust Belt is a good place to start... Thanks to the prolific Marcellus and Utica shale formation, the Appalachian Basin – spanning Pennsylvania, Ohio, West Virginia, and Kentucky – has become one of America’s largest sources of low-cost NGLs. Since 2010, production of NGLs in this region has grown sixfold – from roughly 100,000 bpd to more than 600,000 bpd today. Going forward, the U.S. Energy Information Administration (“EIA”) expects this torrid pace of growth to continue... In the following chart from the EIA, you can see that the eastern U.S. states are expected to be the leading source of production growth through 2050...
The shale revolution has upended the balance of power in America’s energy landscape.
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July 2019
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