PCCA Journal|2
nd
Quarter 2013
10
U.S. exploration and production companies to cost effectively
extract crude oil, liquid petroleum gases (LPG), and natu-
ral gas from these shale plays. The ability to extract these
resources economically has profound global implications.
Development activity in these oil and gas or gas-only shale
plays is well under way, which is driving up domestic pro-
duction. Exhibit 2 shows the relative size and approximate
number of remaining locations to be developed within six of
the most prominent U.S. shale plays.
U.S. crude oil imports have declined by more than 2 mil-
lion barrels per day since 2005. During this period, the U.S.
has gone from being a net importer to a net exporter of re-
fined petroleum products (see Exhibit 3). More significantly,
the U.S. is now second only to Saudi Arabia as the world’s
low-cost producer of ethane, a natural gas liquid that is the
primary “building block” for the many intermediate chemi-
cals, plastics, and resins used to manufacturer thousands of
consumer products.
Natural gas prices in the U.S. are one-fifth of the cost in
Western Europe and one-eighth of the cost in China. The
economic implications for U.S.-based energy producers, the
petrochemical industry, utilities, and industrial manufacturers
are enormous.
Energy Is the New Driver of U.S.
Engineering and Construction
The benefits of increased domestic energy
production extend well beyond the U.S. oil
and gas industry and are having an imme-
diate positive impact on U.S. heavy indus-
try, power generation, transportation, and
consumer product manufacturing. These
activities are being funded by private-sector
investment and are having significant
economic impact on a growing number of
regions throughout the U.S. This private-
sector-funded activity will be the lead driver
of growth in U.S. engineering and construc-
tion activity for the next several years. The
following are a few relevant facts to consider:
• The U.S. has more than 100 years of
proven natural gas reserves. The amount of
reserves continues to grow each year. Much
of these reserves are in unconventional shale
plays in parts of the country that lack explo-
ration and production infrastructure.
• There is a massive build-out of oil and
gas infrastructure under way, including
production wells, gathering pipelines, gas process facili-
ties, takeaway pipelines, compressor stations, transmission
pipelines, fractionation plants, and downstream processing
and refinery facilities.
• U.S. consumption of liquid petroleum products is projected
to remain fairly constant over the next decade, according
to the U.S. Energy Information Agency and PIRA Energy
Group.
• The U.S. is on pace to achieve near energy independence
as early as 2020. By then, any shortfall in crude oil con-
sumption will be sourced from Canada or Mexico.
• Over the past seven years, the U.S. has gone from being
a high-cost producer to the world’s low-cost producer of
natural gas liquids (NGLs). The U.S. is both a consumer
and exporter of NGLs and refined petroleum products.
• NGLs are the primary feedstock in petrochemical manu-
facturing. NGLs and electricity account for as much as 80
percent of the total input cost.
• There are approximately 4,700 major industrial capital and
maintenance projects under way in 2013, totaling $285 bil-
lion. Some $55 billion of these projects are located in Texas
and Louisiana.
• Natural gas (methane) is a low-cost fuel source for power
A Case for Optimism
Continued from page 9
Adhesives
Carpeting Cosmetics Fertilizers
Methane
Refined
Products:
• Gasoline
• Kerosine
• Diesel
• Heating Oil
Propane
Butane
Naptha
Propane
Butane
Pentane
Paints
Fabrics
Plastics
Exhibit 3
Petrochemical Value Chain
Plastics
and Resins
Intermediates
Crude Oil
Natural Gas
Building
Blocks
Rising Production
Declining Imports
Low-cost Producer
Net Exporter
1,2,3,4,5,6,7,8,9 11,12,13,14,15,16,17,18,19,20,...60