Shale Gas Fuels Manufacturing Renaissance

Most people are at least somewhat aware that the U.S. shale oil boom has resulted in lower fuel prices at the pump. But they are probably less familiar with the economic impacts of the shale gas boom.

I have covered some of the impacts of the cheap shale gas bounty in the past. They include a surge of natural gas exports to Mexico and displacement of coal in electric power production.

Today I want to talk about the impact on the chemical manufacturing industry. Natural gas is used in chemical manufacture both as a raw material and as a source of fuel. The constituents of natural gas — methane, ethane, propane, etc. — can be separated out, with each being used as a raw material for different chemical processes.

Methane, for instance, is the primary raw material for methanol production. In 2015 Canada’s Methanex, the world’s largest methanol producer, began making methanol at a new 1.1 million ton per year plant in Geismar, Louisiana. In 2016, the company started up a second plant in Geismar with the same methanol capacity.

What is interesting about these plants is that they were relocated from the company’s production site in Punta Arenas, Chile because of much lower U.S. natural gas prices. The cost of the relocation of these two Methanex plants from Chile was about $1.4 billion, and they employ an estimated 165 people directly and 1,038 indirectly.

This is but a small fraction of the total amount being spent by the chemical industry to relocate and build new capacity in response to low U.S. natural gas prices. According to the American Chemistry Council (ACC), as of July 2017, there are 310 completed, started or potential chemical industry projects chemical industry projects due to shale gas.

The ACC estimates that these projects represent $185 billion in new capital investment and will create 464,000 direct & indirect jobs by 2025, $310 billion in new economic output, and will bring in $26 billion in new tax revenue by 2025.