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May 2017 SEE Monthly Update

Chemicals Companies Benefit from More US Gas Production

The huge abundance of natural gas and natural gas liquids (NGLs) discovered in Pennsylvania’s, Ohio’s, and West Virginia’s Marcellus and Utica formations and in Louisiana’s Haynesville formation is compounded with the associated (liquids-rich gas) found in West Texas’ Permian and North Dakota’s Bakken formations.  Natural gas (methane or C1H4) and NGLs (especially ethane or C2H6) provide both fuel and feedstock for chemical plants.  Their newfound US abundance has improved the costs of building, expanding, and operating these plants in the US, rather than overseas as has historically been the case.

The diagram below shows how one of the most important petrochemical precursors, ethylene, is produced from ethane.  Ethylene can be made from many different feedstocks including crude oil, so commodity chemical makers, by definition, must choose the least expensive and most available feedstock to keep their products competitively priced.

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           Copyright 2017, Starks Energy Economics, LLC. This information may not be disclosed, copied or disseminated, in whole or in part, without the prior written permission of Starks Energy Economics, LLC. This communication is based on information which Starks Energy Economics, LLC believes is reliable. However, Starks Energy Economics, LLC does not represent or warrant its accuracy. This communication should not be considered as an offer or solicitation to buy or sell any securities.

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