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ACC - Shale Gas and New U.S. Chemical Industry Investment: $164 Billion and Counting

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The slide deck used by the American Chemistry Council at a Hudson Institute event held on April 6. The slide deck shares data from a recently updated study from the ACC showing current and planned projects related to shale gas and gas liquids is $164 billion. The American manufacturing scene is being transformed by the shale energy revolution.

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ACC - Shale Gas and New U.S. Chemical Industry Investment: $164 Billion and Counting

  1. 1. April 2016 SHALE GAS AND NEW U.S. CHEMICAL INDUSTRY INVESTMENT: $164 BILLION AND COUNTING
  2. 2. U.S. Chemical Industry Global CostAdvantage Relative Position of U.S. (2005-2015) (Petrochemical Production Costs) 2015PRODUCTIONCOSTS Estimated*($/lb.) GLOBAL SUPPLY (billion lbs.) *Based on estimates from best available data HIGH LOW MIDDLE EAST UNITED STATES IN 2015 CHINA WESTERN EUROPE OTHER NORTHEAST ASIA RELATIVE POSITION OF UNITED STATES IN 2005
  3. 3. 30-year supply that can be profitably produced at $4.00 per million BTUs or less U.S. chemical industry benefits from lower costs for energy and feedstock 264 projects and $164 billion in potential capital investment announced as of April 2016 40% completed or underway, 55% in planning phase 61% is by firms based outside the U.S. ACC data IHS data U.S. Shale GasChemical Investment
  4. 4.  Natural gas liquids, especially ethane, are primary feedstock for chemical-making in the U.S.  Companies overseas mostly use an oil-based feedstock  Due to vast new NGL supplies, U.S. ethane feedstock is selling at historically low prices  Huge NGL growth predicted; sustained opportunity for U.S. chemical industry Natural Gas Liquids Key to U.S. CostAdvantage NGL production to double by 2020 Ethane supplies to quadruple by 2025 IHS Report: “America’s New Energy Future: The Unconventional Oil and Gas Revolution and the U.S. Economy – Volume 3: A Manufacturing Renaissance,” Sept. 2013
  5. 5. Oil-to-Gas Ratio: A Proxy for U.S. Petrochemicals Competitiveness Oil price declines have created some economic uncertainty Current ratio remains very favorable for U.S. competitiveness Growth likely to slow, but be offset by stimulative consumer effect When the ratio is above 7, U.S. competitiveness is enhanced. Sources: EIA, ICE, NYMEX 0 5 10 15 20 25 30 35 40 45 2005 2010 2015 2020 Oil-to-GasPriceRatio Oil and Gas Ratio: A Proxy for U.S. Petrochemicals Competitiveness
  6. 6. Cumulative Announced Chemical Industry Investments from Shale Gas $0 $20 $40 $60 $80 $100 $120 $140 $160 $180 0 25 50 75 100 125 150 175 200 225 250 275 300 Total Investment Number of Announced Projects BillionsNumber of Projects Source: ACC analysis, Dec. 2010 – March 2016
  7. 7. U.S. Chemical Industry Output from Shale Gas- Related Investments $0 $20 $40 $60 $80 $100 $120 10 11 12 13 14 15 16 17 18 19 20 21 22 23 Billions of 2015 Dollars • By 2023, additional output from $164 billion in capital investment generates more than $106 billion per year in new chemical industry shipments • This is an ongoing, permanent upward shift in shipments
  8. 8. The Build-Out is Underway (Chemical Industry Construction Spending) $0 $5 $10 $15 $20 $25 $30 $35 $40 $45 $50 94 96 98 00 02 04 06 08 10 12 14 Thousands $ Billions, SAAR, 3MMA Note: Data are presented as a 3 month moving average to smooth month-to-month variations. Source: Census Bureau
  9. 9. $301 billion738,000 EconomicContributionsFromIncreasedChemical IndustryInvestment Permanent NEW jobs throughout the U.S. economy by 2023 from $106 billion in new chemical industry output Permanent NEW U.S. economic output by 2023 from $106 billion in new chemical industry output Based on $164 billion in cumulative U.S. chemical industry investment completed, underway, or planned as of April 2016
  10. 10. Unconventional Energy Benefits the U.S. IHS Report: “America’s New Energy Future: The Unconventional Oil and Gas Revolution and the U.S. Economy – Volume 3: A Manufacturing Renaissance,” Sept. 2013  Household income: $3,500 more in 2025 due to unconventional energy  Jobs: Nearly 4 million jobs supported in 2025, up from 2.1 million in 2013  U.S. GDP: Grows 3.2% by 2025, equal to $500-600 billion  IHS report measured economic benefits of unconventional oil and natural gas activity across value chain Household Income
  11. 11. 50 60 70 80 90 100 110 120 130 140 150 1987 1992 1997 2002 2007 2012 2017 2022 United States Western Europe Japan U.S. Is Capturing Market Share Away From Western Europe Chemistry Production (2012=100) Sources: Eurostat, Federal Reserve, METI, ACC analysis
  12. 12. U.S. Outpacing Europe “Natural gas prices in Europe are three times as high as in America, and electricity prices are twice as high…It's very hard to imagine how Europe can recover.” - Paolo Scaroni, CEO, Eni I think we’d be making a big mistake if we didn’t think hard about how to encourage [natural gas production] right here in the UK. We’re seeing businesses that have previously gone off to Mexico and elsewhere come back to the U.S.” - David Cameron, British Prime Minister “Chemicals depend upon competitive energy and feedstock costs…It could well be another European dinosaur.” - Jim Ratcliffe, Chairman, INEOS “When people choose whether to invest in Europe or the US, what they think about most is the cost of energy. The loss of competitiveness is frightening.” Antonio Tajani, European Industry Commissioner
  13. 13. $14B in NEW, PERMANENT federal, state, and local tax revenue from increased chemical industry output (by 2020) Nearly $30 Billion Projected increase in Net Exports of U.S. chemicals (2014-2030) Rapid Growth in Net Exports of Key Shale Gas-Advantaged Chemicals Net exports of shale gas advantaged chemicals will grow due to increased chemical industry investment in the U.S. As of April 2016, $164 billion in U.S. chemical investment is completed, underway, or planned.
  14. 14.  President Obama pledged to facilitate permitting of new manufacturing plants  Congress should enact “all of the above” energy policy  Natural gas, energy efficiency, and energy recovery are key parts of any national strategy White House and Congress Must Help
  15. 15. Access & Infrastructure: Allow access to natural gas reserves on government and private lands. Ensure reliable infrastructure to transport supplies State Regulations: Implement responsible, state-based regulations that avoid undue restrictions on natural gas production Permitting: Ensure timely approval of permits for manufacturing projects and investments such as new chemical plants and expansions Tax Treatment: Maintain accelerated depreciation in tax policy. Minimize cost and reduce complexity for businesses Policies Needed to Realize Potential

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