An Appalachian Petrochemical Renaissance within Reach

The United States is on the cusp of an Appalachian petrochemical renaissance that scarcely could have been imagined a decade ago.

Primarily due to the Marcellus and Utica shale plays, Appalachia now produces more than 32 percent of U.S. natural gas and 600 thousand barrels per day (BPD) of natural gas liquids (NGLs). In fact, Appalachian shale gas is the principal driver for growth in U.S. natural gas production.

The Appalachian region has abundant resources and extensive downstream industrial activity, particularly in the quad-state area of West Virginia, Pennsylvania, Ohio, and Kentucky; this creates an opportunity for a renaissance of the Appalachian petrochemical industry. Critical to this renaissance is petrochemical infrastructure, including NGL transport and storage.

Petrochemical Manufacturing and Production

Petrochemicals, in its simplest definition, are chemicals obtained either directly from cracking (pyrolysis), or indirectly from the chemical processing of oil or natural gas. Major petrochemicals include acetylene, benzene, ethane, methane, propane, and hydrogen, from which hundreds of other chemicals are derived. In fact, they are a feedstock for many of the items we use every day—think about phones, clothing, credit cards, bags, detergents, antifreeze, appliances, paint, furniture, and thousands of other products.

American manufacturing relies on a steady source of petrochemicals to produce products, such as plastics, paints, solvents, and automotive parts, and are increasingly important to the Nation’s economy. According to the American Chemistry Council (ACC), the U.S. chemical industry is a $528 billion enterprise that supports 25 percent of U.S. gross domestic products; provides 12 percent of the world’s chemicals; and supports 529 thousand American jobs.

Currently, most U.S. petrochemical production occurs in the Gulf Coast region. U.S. petrochemicals are consumed all over the United States, as well as around the world, so depending on the type and form of petrochemical, they are transported by rail, barge, truck, or pipeline out of the Gulf Coast region to manufacturers of finished goods.

Appalachian NGLs—specifically ethane, a valuable petrochemical feedstock—are highly underutilized within the region with most being shipped to the Gulf Coast where according to DOE’s report to Congress, Ethane Storage and Distribution Hub in the United States, over 95 percent of America’s ethylene (which is made from ethane) production capacity is located in Texas and in Louisiana. If a portion of Appalachia’s ethane could be converted to valuable products within Appalachia, versus exported from the region, it would create additional economic opportunity for Appalachia and geographically diversify the U.S. petrochemical industry, which has economic security benefits.

A Driver for U.S. Competitiveness

The economic benefit of expanding the petrochemical industry from the Gulf Coast region to Appalachia could be substantial. Today in Appalachia, approximately 260 thousand BDP of ethane is produced and extracted from shale gas. By 2025, DOE’s Energy Information Administration projects that volume to be 640 thousand BDP. With an industry of this scale, DOE estimates that the ethane resource in the Appalachian region is large enough to support at least five world-class petrochemical crackers, a regional pipeline and storage network, and extensive downstream manufacturing facilities.

Additionally, the Appalachian region is an ideal location for petrochemical manufacturing because it is near the abundant NGL resources from the Marcellus and Utica shales, as well as being in close proximity to the East Coast and Midwest manufacturing bases that use petrochemicals as feedstocks. ACC estimates that an Appalachian petrochemical industry could attract over $30 billion in capital investment, create more than 100,000 permanent jobs, increase annual business revenue by $30 billion annually, as well as generate approximately $3 billion in annual tax revenues. An industry of this magnitude would support increased demand for NGL production and stimulate further shale gas production. It would create a lower cost, regional supply of petrochemical derivatives (such as polyethylene) that are feedstocks for regional manufacturers. It would also geographically diversify the U.S. petrochemical manufacturing base, which is positive for U.S. manufacturing and energy security.

Learn more about the Appalachian petrochemical renaissance and the reliability of this vital industrial sector, through the Office of Fossil Energy’s newest infographic. Click here.