The Shale Crescent’s Time Has Come

For 75 years, the Gulf Coast has been the obvious place for petrochemical companies to invest in North America. But that distinction has changed.

The massive energy finds in the Marcellus and Utica shale formations, which together lie underneath areas of Ohio, West Virginia and Pennsylvania that we call Shale Crescent USA, have disrupted the industry’s time-honored economics.

Now, for many companies with established and expandable footprints on the Gulf Coast, it likely doesn’t make sense to invest in a region that is a growing petrochemical hub. But for those considering new site investments, the economics are clear. An IHS Markit study evaluated hypothetical returns for major petrochemical and plastics investments made in the Gulf and Shale Crescent USA. The bottom line: the same plant constructed and operated in Shale Crescent USA instead of the Gulf Coast could offer a pre-tax cash flow advantage of $3.6 billion over a 20-year time span and a net present value four times higher.

So, as executives plan for what many have dubbed a second wave of US petrochemical investment, it’s time to get smart about what’s happening in Shale Crescent USA.

The impact of the Marcellus and Utica shale formations has been transformative. If Shale Crescent USA were its own country it would rank third in natural gas production, behind just Russia and the United States as a whole. Infact by 2030, the region will account for an estimated 40 percent of U.S. natural gas production. It’s why Shale Crescent USA is home to the lowest natural gas prices in the developed world.

The IHS Markit study mentioned previously focused heavily on the advantages of our low-cost ethane. We are currently conducting a follow-up study and expect to find similar advantages using propane, butane or even methane, demonstrating further benefit of investing in Shale Crescent USA.

Shale Crescent USA is as much about access as it is about energy. Among its unique assets are:

• fresh water for processing and transport.
• more than two-thirds of U.S. polyethylene consumption in just a day’s drive.
• a local workforce with one of the lowest turnover rates in the nation.
• an education system that graduates more than 11,000 engineering students each year.
• stable weather patterns without seasonal risk of production-halting floods or hurricanes.

At the end of 2018, the U.S. Department of Energy delivered a 91-page report to Congress on the potential for an energy storage and distribution hub in the Appalachian region. Secretary of Energy Rick Perry was clear about the opportunity at hand. “For us to be at this moment in time where we have the potential to diversify our petrochemical footprint, I think it would be very inopportune for us to miss this opportunity,” he said.

The energy balance has taken a significant turn and is creating opportunities in Shale Crescent USA that haven’t been thought about for a long time. It’s time to seize the opportunity to harness this incredible resource and diversify and secure our petrochemical industry now and for the future of this great country.