June 6, 2019

Petrochemical Demand is on the Rise with New Opportunity Presented to Appalachia

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The American petrochemical industry continues to grow and has the potential to become a dominant commodity in the near future. The number of chemical manufacturing facilities like Shell’s ethane cracker plant being constructed in Beaver County, continue to increase and attract large sums of domestic and foreign investment.

Petrochemicals, which are chemicals derived from crude oil and natural gas, are used to produce a variety of products ranging from dyes and pigments to plastic resins and pharmaceuticals. The International Energy Agency estimates that petrochemicals will, “account for more than a third,” of the demand for oil globally and will, “have a greater influence on the future of oil,” than the transportation sector.

According to the American Chemical Council, there are 333 chemical projects/facilities that total $200 billion in value in the United States. Furthermore, chemical production accounted for 45 percent of all American manufacturing in 2017, which a significant increase from 18 percent in 2011. This growth coincides with the shale gas boom in the United States.

Growth in the chemical manufacturing industry has generated a considerable amount of domestic and foreign investment, especially in the states along the Gulf of Mexico. Louisiana is home to one of the newest petrochemical plants called the LACC, an ethane cracker plant which will cost $1.9 billion to build. The LACC is a jointly owned venture between Texas-based Westlake Chemical and South Korean Lotte Chemicals and will be able to produce 1 million tons of ethylene, which is a building block for plastics, annually.

The petrochemical industry exists in areas that produce the feedstock they need to operate. While the Gulf States have historically been the home for the petrochemical industry because that is where much of the nation’s natural gas has been extracted in the past, Appalachia is shaping up to be the new frontier. Pennsylvania’s Marcellus and Utica shale basins have provided the state with a bounty of natural gas.

Hoping to seize this opportunity, Shell is currently constructing a $6 billion ethane cracker plant in Beaver County which will use Marcellus and Utica shale gas to create 1.6 million tons of polyethylene annually. Its location outside of the Gulf has significance, as it will be the first ethane cracker plant built outside of the Gulf of Mexico in more than 20 years. In a statement from Shell, the company explained that the reason for investment in Pennsylvania was not only due to its natural gas feedstock, but also its location. The spokesperson noted that the Beaver County cracker plant is “within a 700-mile radius” of “seventy-five percent of all polyethelyne demand”, thus cutting transportation costs for delivery.

Natural gas production is not slowing down in Pennsylvania. This means that the downstream opportunities for shale gas in Pennsylvania are only beginning. The American Chemical Council estimates that the Marcellus region could be home to five more cracker plants. Given the rise in demand for petrochemicals and the abundance of natural gas in the region, Pennsylvania could become a giant in the industry.

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