Shale gas is the “magic bullet” needed for the full recovery of the U.S. petrochemical industry, according to a recent report from Chemical Market Resources Inc. consulting firm.
Increased use of technologies such as horizontal drilling and hydraulic fracturing, or fracking, has allowed for development of large amounts of natural gas in North America. The new supplies have prompted a number of plastics and chemicals firms to announce new construction or expansion of capacities for ethylene feedstock and polyethylene resin.
New cracker announcements would add at least 11.7 billion pounds of ethylene capacity in North America by 2017, according to the report from Houston-based CMR. Expansions and debottleneckings could add another 5 billion pounds to that total.
In PE, expansions announced by ExxonMobil Chemical Co. and Chevron Phillips Chemical Co. LP alone would add more than 5 billion pounds. Such announcements were unthinkable just five years ago, when natural gas supplies were dwindling and the material was priced in double-digits.
PE “will be the dominant derivative for shale gas,” according to the report, which was written by CMR President Balaji Singh and market analyst J.N. Swamy.
But the report also questions how many announced projects actually will be built and how much of new ethylene or PE capacity will be sold into export markets.
“Companies tend to analyze new capacity in terms of its percentage of existing capacity,” the report said. “This makes the numbers appear more acceptable, especially when overlaid on projected demand growth.”
Shale development also could have a negative impact on propylene feedstock and derivatives like polypropylene resin, since natural-gas-based ethane produces less propylene than crude-oil-based naphtha does. The CMR report estimates that ethane use in ethylene crackers has increased from 70 percent to 87 percent since the shale boom began.
Overall, the report said shale gas is a positive development.
“Shale gas will have a transformative effect on the U.S. petrochemical industry, leading to new invests, more jobs and greater sense of excitement,” it said.