By: Frank Esposito
September 6, 2013
Plastics are among many U.S. industries that will benefit from development of shale-based natural gas, according to a new study from research and consulting leader IHS Inc.
The report asserts that by 2020 shale energy development will have created almost 15,000 new U.S. plastics industry jobs, as well as almost $1.3 billion in value-added from the industry to GDP and $868 million in labor income.
Output in two key plastic-related areas is expected to rise through 2020 — and even more through 2025 — because of changes to the oil and gas value chains. Resins and synthetic material manufacturing output is set to rise an additional 6 percent to 2020, while output in plastics and rubber product manufacturing is expected to grow another 4.1 percent, according to the IHS report, which was supported by the Washington-based Society of the Plastics Industry Inc.
By 2025, those increases will have grown to 8.1 percent for resins and 4.6 percent for plastics and rubber products.
SPI President and CEO William Carteaux said in a Sept. 5 news release that the study "shows how shale energy development is creating a global competitive advantage for U.S. plastics manufacturers by bringing energy and feedstock prices down … particularly when you consider that most resins in the U.S. are produced from natural gas, while those in Europe and Asia are made from oil-based feedstocks."
"The abundant new sources of natural gas via shale are set to be a real game-changer for the U.S. plastics industry," he added.
Shale gas development in the U.S. is being driven by hydraulic fracturing and horizontal drilling, which are allowing energy companies to develop areas that previously were inaccessible. This in turn has increased supplies of natural gas-based ethane and propane, which can be used as petrochemical feedstocks.
These new supplies have prompted petrochemicals firms to announce major capacity expansions for ethylene and propylene monomer, as well as polyethylene resin. Announced ethylene expansions total almost 20 billion pounds per year, while annual propylene supplies could increase by almost 9 billion pounds. Market watchers and consultants — including some with IHS — have predicted that these new resin supplies will lead to expansion in U.S. plastics processing as well.
"Prior to the recent expansion of unconventional gas, the outlook for the [plastics] industry was bleak," said IHS' chemical consulting managing director, Mark Wegenka, in the release. "It was suffering from significant plant shutdowns and capacity reductions."
"However, as a result of these unconventional oil and gas supplies, we've witnessed a complete turnaround," he added. "The industry is not only competitive again, but it's attracting significant domestic and foreign investment and adding capacity that's resulting in more high-quality U.S. jobs that pay well."
The report — titled "America's New Energy Future : The Unconventional Oil & Gas Revolution and the Economy — Volume 3: A Manufacturing Renaissance" — also asserts that the overall U.S. trade position will improve because of significant reductions in energy imports and increased global competitiveness of U.S.-based energy industries.
The report also lists polyolefins (PE and PP) and the vinyls chain (including PVC) as two of nine value chains where U.S. chemical investment will be largely focused. In the petrochemical sector, ethylene and propylene will be two of four segments most impacted by unconventional oil and gas development.
The energy-related chemicals value of U.S. production for polyolefins and the vinyls chain is expected to grow exponentially, according to the report. Energy-related U.S. polyolefins production value is pegged at $214 million in 2013, but should reach almost $35 billion by 2025. For the vinyls chain, a 2013 energy-related production value of $114 million is expected to reach almost $8 billion by 2025.
To further explore the impact of shale gas on plastics, IHS and SPI are co-sponsoring a Global Plastics Summit event Nov. 4-6 in Chicago.