Recent analysis from the consulting group IHS shows how shale energy is poised to strengthen the U.S. chemical industry for years to come.
As recently as 2011, according to IHS, North America and Western Europe each produced the same amount of basic chemicals and plastics: about 30 million tons apiece. When it came to petrochemical production, the two regions were matched fairly evenly.
But not for long.
By 2020, IHS predicts, output from North American chemical producers will more than double to 70 million tons. As for Western Europe, its chemicals and plastics output will shrink by fully one-third, to just 20 million tons.
A wave of petrochemical investment
That’s the power of shale energy.
In less than a decade’s time, the even match between the two regions will become a 70-20 spread as North America expands and Western Europe contracts. That is a tectonic market shift when one considers how global chemical demand is expected to rise by 50 percent over the next decade.
The reason for that shift is the massive increase in U.S. natural gas production thanks to shale energy development – up more than 30 percent in the last seven years to its highest level ever.
The abundance of North American natural gas is a tremendous competitive advantage. That is because the U.S. petrochemical industry uses natural gas as a low-cost energy source in addition to using natural gas liquids – like ethane – as feedstocks for making plastics and other essential materials. As in much of the rest of the world, petrochemicals in Europe are usually made from oil-based naptha feedstocks, which today are far more expensive than those from natural gas.
This helps explain the surge in petrochemical investment currently under way in the United States. According to the American Chemistry Council, over the last several years, 125 new chemical projects – worth upwards of $84 billion – have been announced in the U.S. That includes ExxonMobil’s planned multi-billion dollar ethane cracker and premium products facilities at our integrated Baytown complex in Texas.
When experts like the researchers at IHS or Pricewaterhouse Coopers talk about the U.S. “manufacturing renaissance” that has sprung out of the shale revolution, this sort of chemical industry expansion is a big part of what they mean.
