To see how innovation in one industry can open doors in another, take a look at a speech given last week by Steve Pryor, president of ExxonMobil Chemical. We already know that rising U.S. natural gas production is strengthening the economy by creating jobs and tax revenue. But in Steve’s speech, you’ll see it also is providing a big boost to the U.S. petrochemical industry.
What’s the connection? Natural gas reserves contain varying amounts of associated liquids, including ethane – an organic compound that is routinely separated from the gas and then used by chemical producers to make plastics and other building blocks of modern manufacturing.
So, more natural gas usually means more ethane. In fact, Steve notes that as a result of the recent rise in domestic gas output, U.S. ethane production has risen by 25 percent over the last five years.
This growing source of feedstock has made it more economically attractive to produce petrochemicals here in the United States. As a result, U.S. products are more competitive on the world market, leading to a rise in exports.
As Steve noted in his speech to the Cambridge Energy Research Associates’ annual conference (CERAWeek), this is a far different situation than what many had predicted: “The current strength of the U.S. market contrasts with the conventional wisdom just a few years ago that U.S. petrochemical production would decline … and the U.S. would become a net importer of petrochemicals.”
What brought about this turnaround? Innovation. Innovation by the men and women of the U.S. oil and gas industry.
I have talked before about the recent upswing in U.S. natural gas production, but let me restate a few statistics here: In just the past five years, the innovative application of technologies for tapping gas found in shale and other types of rock has helped enable a 20-percent rise in U.S. natural gas production and restored U.S. gas output to levels not seen since its peak in the 1970s.
And the trend is upward. The Department of Energy’s most recent long-term forecast sees U.S. production of natural gas rising steadily and significantly through 2035.
This forecast has positive implications for U.S. environmental goals. Not only is natural gas the cleanest-burning major fuel, but increased gas supplies also help to support the environmental benefits enabled by the petrochemical industry. Products made from ethane and other petrochemicals – such as strong-but-lightweight plastics and synthetic fibers – help manufacturers and consumers conserve resources, save energy and reduce greenhouse gas emissions.
In his speech, Steve cautioned his audience that because the U.S. is a mature market, new investments in U.S. petrochemical capacity – at least in the near term – will likely not be new grassroots facilities, but rather incremental expansions and conversions of existing plants.
Still, these types of investments were uneconomic just a few years ago. Which raises the question: Which energy developments might be uneconomic – or even unimaginable – today, only to become reality in the future thanks to technologies and innovation enabled by the U.S. energy industry?
I hope policymakers keep this question in mind when considering how to meet our country’s energy, economic and environmental challenges, and the most effective ways to encourage innovation.