The shale gas boom could significantly cut costs for the chemical industry and ultimately benefit the apparel, electronics, machinery and other industries, according to a report released Tuesday.
The report released by PwC US suggests cheap natural gas liquids could prompt some companies to return production to the United States.
“As the U.S. chemical industry expands (natural gas liquids) conversion into a higher volume of downstream products, the positive impacts could flow through the value chain into other manufacturing sectors, particularly given that chemicals are used in an estimated 90 percent of all manufactured products,” Anthony J. Scamuffa, U.S. Chemicals leader for PwC, said in a statement. “Not only could the abundance of (natural gas liquids) help drive reduced pricing for derivative products, it could also potentially drive domestic re-shoring activity and possibly bring about a favorable shift in the U.S. balance of trade as ethylene capacity comes on line.”
The report, Shale Gas: Reshaping the U.S. Chemicals Industry, followed an earlier PwC US report that estimated shale gas could cut raw material and energy costs for U.S. manufacturing by as much as $11.6 billion annually by 2025.
The chemical industry uses natural gas liquids to produce products that ultimately are used in a number of manufacturing sectors, so lower costs for natural gas could mean reduced costs for a wide range of other products, according to the report.
PwC said specialty chemical companies are starting to feel the effects of lower natural gas and natural gas liquid prices and speculated that companies might look for longer-term sourcing relationships and partnerships with suppliers.
The report said manufacturers should see costs drop if they replace petroleum-based raw materials with products based on ethylene, which is derived from natural gas, a pattern it said would be repeated for other petroleum-based raw materials, including many used in building and construction.
Scamuffa noted that the extent of the shift would depend, in part, on public tolerance for expanded hydraulic fracturing, which is used to extract shale gas.