Rethinking Conventional Energy Investment Wisdom
America’s shale energy revolution, which moved the United States in a decade’s time from an outlook of increasing energy scarcity and dependence to one of affordability and abundance, has been transformational for global energy production markets.
Historically, investment in oil and gas production, pipelines, and the associated petrochemical manufacturing facilities has centered around Houston and the Gulf region. For good reason – America’s oil output more than doubled in just a decade thanks to a combination of technical advances and aggressive investments into layers of oil-rich shale that have transformed the Permian, once considered a worn-out patch, into the world’s most productive oil field.
But what makes American shale development a “revolution” is the way in which it challenges us to rethink conventional investment wisdom across the energy sector.
Almost 2,000 miles northeast of Texas, sits the Shale Crescent region of Pennsylvania, Ohio and West Virginia, which is responsible for 85 percent of the increase in U.S. natural gas production since 2008. Projections from the U.S. Department of Energy suggest natural gas liquid production in the region will increase more than 700 percent by 2023 – demonstrating the region’s long-term, development opportunity.
Natural gas is the fuel of manufacturing and U.S. manufacturers now have an advantage over many foreign competitors thanks to the abundant and affordable supply found in the heart of Appalachia. Over the past decade, in fact, consumers – which include industrial users – in the Shale Crescent have realized more than $90 billion in natural gas savings, according to a new economic analysis. Nationwide, those energy-related savings top more than $1 trillion for all consumers.
The strength of natural gas production and opportunity for long-term growth gives manufacturers in the Shale Crescent a competitive edge. In fact, an IHS Markit report confirmed the Shale Crescent region as the most cost effective and profitable place in the United States to build a petrochemical plant.
Just as America’s quick rise to the world’s top production spot transformed investment decisions, it’s time to recognize these market trends and seize the opportunity to expand petrochemical manufacturing beyond the shoreline to Appalachia.
Beyond the abundant resource supply of ethane and propane, the “building blocks” of petrochemicals integral to plastics manufacturing, projects in Shale Crescent have easy access to water for transportation and processing via the Ohio River and its tributaries, proximity to 50 percent of high-demand North American markets and over 70 percent of polyethylene demand is within a day’s drive.
Changing a long-held mindset takes time, but companies are beginning to take notice. The Shell Pennsylvania Petrochemicals Complex under construction just outside of Pittsburgh represents the first major petrochemical facility to be built outside the Gulf region in a generation. PTT Global Chemical continues to weigh final investment on a facility in eastern Ohio and other major companies are reportedly scouting locations, as well.
America’s energy outlook has seen a remarkable shift in the past 10 years, and so too have the opportunities on where to invest in petrochemical development. Our country will benefit from diversifying and expanding geography of the petrochemical industry, both from security and reliability standpoint – especially during extreme weather events that have disrupted operations and supply.
Building demand at home for America’s natural gas and oil abundance will pay dividends for generations to come. The Shale Crescent USA, sitting atop of the most prolific shale plays in the world, is the most strategic region for petrochemical development.
Jerry James is the President of Artex Oil and co-founder of ShaleCrescent USA, an economic development initiative that aims to drive growth and investment in Ohio, Pennsylvania and West Virginia. Learn more at ShaleCrescentUSA.com.