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Shale gas ‘may spark US manufacturing boom’

Shale gas offers US manufacturers a $150-billion opportunity to diversify into the downstream sector, consultancy PricewaterhouseCoopers (PwC) claims

In a new report, Shale Gas: a renaissance in US manufacturing?, the consultancy estimates that, because high shale-gas production is lowering feedstock costs, US manufacturers will save $11.6 billion annually through 2025. PwC added that this, in turn, will create an estimated 1 million jobs will be created over the same period in the petrochemicals, metals and industrial manufacturing sectors.

Cheaper ethane, in particular, will provide a significant global cost advantage over chemical feedstocks such as naphtha, the report notes.

“Shale gas has the potential to spark a US manufacturing renaissance over the next few years, boosting revenue and job creation,” the report notes. “While there has been a sharp focus cast upon shale gas - both on its potential promise and possible drawbacks - there has been less focus on how shale gas affects other industries.”

The US has about a third of the world’s proved natural gas reserves, which topped 300 trillion cubic feet (cf) in 2012 for the first time ever, according to Energy Information Administration statistics. Technically recoverable reserves are approaching 1 quadrillion cf and stood at 862 trillion cf in 2009.

The Marcellus shale is the largest natural gas field in the lower 48 states, with estimated recoverable reserves of 410 trillion cf. Only a decade ago, the US Geological Survey estimated Marcellus’ reserves at just 2 trillion cf.

The most extensive development in the Marcellus has been in Pennsylvania and New York state, America’s manufacturing heartland, and industries such as petrochemicals and steel are uniquely positioned to benefit from the new sources of supply, PwC said.

The PwC report said states around the Marcellus basin and the Gulf Coast are likely to see the most employment gains due to lower transportation costs. Though the number of new facilities is slow in coming, as of 2011, 17 US manufacturers had disclosed higher demand for their products in Securities and Exchange Commission filings due to shale-gas development. That compares to none in 2008.

Companies planning new projects in Pennsylvania and Louisiana cover the gamut of downstream and secondary industries, including Shell, Chevron, Bayer, Dow Chemical and US Steel.

“These types of announcements are likely to become more common, with more companies outside the chemicals and and metals industries planning new capital expenditures in the US to take advantage of lower costs resulting from shale gas,” PwC said.

However, PwC also identified a number of factors which could slow development. Infrastructure constraints, particularly in the mid-Atlantic states, could prevent new supply from reaching markets. Also, future tax policies and public acceptance of technologies such as hydraulic fracturing will also affect the ability of upstream producers to bring new volumes on stream.

“Manufacturers will benefit only if shale gas is extracted profitably and safely. Effectively communicating the value that shale gas can create for US workers and communities is essential to achieving these outcomes,” PwC said.

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