Appalachian Basin Forecast – Most Profitable Petrochemical Region
US Department of Energy (DOE) Secretary Rick Perry recently testified before the US House of Representatives Committee on Appropriations that DOE is actively working on plans to transition Appalachia into a petrochemical refining center with investment in the region a priority for national security.
Perry further explained the Appalachian region “makes sense because you’re sitting on top of the Marcellus and Utica which are prolific gas fields, and helping transition the workers who are either out of work or not working in jobs that are satisfactory from their perspective into higher-paying refining and petrochemical type jobs. That is a something we’re working on actively today at DOE.”
In recent months there has been a growing body of research on the advantages the Appalachian Basin petrochemical industry has over the Gulf Coast region.
These advantages include abundant natural gas, access to water, proximity to markets, skilled labor and cost advantages all exceeding that of the gulf coast region.
Natural Gas
The Appalachia Basin sits atop the Marcellus and Utica Shale formations, two of the most prolific shale plays in the world. Natural gas from the Marcellus and Utica shale plays accounted for approximately 30% of total U.S. natural gas production in 2017 and is expected to account for more than 40% of the nation’s production by 2030.
Water
The Appalachia Basin provides ample room for large manufacturing complexes, but still provides convenient access to large waterways, such as the Ohio River and its many tributaries.
Proximity to Markets
Businesses in the Appalachia Basin have a significant geographic advantage over the Gulf Coast due to the following:
- Within one day’s drive to 50% of high-demand North American markets
- Within one day’s drive to 70% of polyethylene demand
- The lowest natural gas prices within the developed world
Skilled Labor
With one of the lowest employee turnover rates in the country, the Appalachia Basin has a world-class workforce, combining a storied history of manufacturing and a world-renowned, forward-thinking plastics manufacturing industry.
Cost Advantages
Appalachian Basin has dramatic cost advantages over the Gulf Coast region with availability ethane, ethylene, and polyethylene at cost of on average 23% less than that in the Gulf Coast region. These and other cost savings simulated over a period of 20 years, from 2020 to 2040, resulting in a net present value cash flow advantage of $713 million, or a pre-tax cash flow advantage of $3.6 billion or 4 times the savings of that in the Gulf Coast region.
These advantages over the Gulf Coast region will move the Appalachia Basin and region into an unprecedented growth in all areas of the region as the United States remains the world’s leader in natural gas and oil production.
