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16 September 2013 Martha Gilchrist Moore Senior Director, Policy Analysis and Economics

16 September 2013 Martha Gilchrist Moore Senior Director, Policy Analysis and Economics. Shale Gas, competitiveness, and new u.s. chemical investment. Shale Gas Changes Everything . Shale gas is possibly the most important energy development in the past 50 years.

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16 September 2013 Martha Gilchrist Moore Senior Director, Policy Analysis and Economics

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  1. 16 September 2013 Martha Gilchrist Moore Senior Director, Policy Analysis and Economics Shale Gas, competitiveness, and new u.s. chemical investment

  2. Shale Gas Changes Everything Shale gas is possibly the most important energy development in the past 50 years. Shale gas now accounts for more than a third of US natural gas production. Abundant supplies of natural gas liquids are changing the economics of global petrochemical production patterns. Lower natural gas costs are improving the competitiveness of not only chemical producers, but other gas-intensive manufacturers

  3. The Chemical Industry is Energy-Intensive Fuel, Power and Feedstock Costs as a Percent of Total Costs Source: ACC analysis

  4. Global Natural Gas Price Trends $ per million BTUs Source: EIA, Petrobas, IMF, World Bank, various national statistical agencies

  5. Oil and Natural Gas Prices(oil equivalent) Source: Energy Information Administration

  6. Ratio of Oil and Natural Gas PricesProxy for Gulf Coast Based Petrochemicals Ratio of Oil (Brent)-to-Natural Gas (Henry Hub) Price Source: based on data from the Energy Information Administration

  7. Global Ethylene Supply Curve (Petrochemical Production Costs by Country/Region)

  8. Global Ethylene Supply Curve (Petrochemical Production Costs by Country/Region)

  9. Natural Gas Liquids Key to U.S. Cost Advantage • Natural gas liquids, especially ethane, are primary feedstock for chemical-making in the U.S. • Companies overseas mostly use an oil-based feedstock • Due to vast new NGL supplies, U.S. ethane feedstock is selling at historically low prices • Huge NGL growth predicted; sustained opportunity for U.S. chemical industry NGL production to double by 2020 Ethane supplies to quadruple by 2025 IHS Report: “America’s New Energy Future: The Unconventional Oil and Gas Revolution and the U.S. Economy – Volume 3: A Manufacturing Renaissance,” Sept. 2013

  10. Shale Boom Driving New U.S. InvestmentNorth American Competitive Advantage Sustained through 2020 Affordable, competitively priced natural gas is driving significant new capital investment in the US manufacturing sector Growing supplies of natural gas liquids (chemical feedstock) and long-term, sustained availability make US chemical production economically attractive Plastic resin exports are already rising as the US becomes a global low cost producer Companies are investing in the US to capitalize on the advantage More than half of new, publicly-announced chemical industry investment is from firms based outside the US

  11. U.S. Shale Gas Chemical Investment Nearly 130 projects announced as of October 2013 $85 billion in potential chemical industry capital investments 10-12% higher chemistry output by 2020 Manufacturing renaissance due to increased access to natural gas from shale Downstream partners are more competitive than ever

  12. Policies Needed to Realize Potential Access: Allow access to natural gas reserves on government and private lands. Infrastructure: Ensure reliable infrastructure to transport supplies State Regulations: Implement responsible state-based regulations that avoid undue restrictions on natural gas supplies Tax Treatment: Minimize cost and reduce complexity for businesses. Maintain accelerated depreciation in tax policy

  13. Concluding Remarks As the US and global economic recoveries strengthen, demand for US chemistry will grow. Shale gas changes everything. Renewed US competitiveness from shale gas is already lifting chemical exports and production and will grow as new capacity comes online. Strong investment growth in chemicals (including resins) already materializing. Investments by other customer industries will create additional opportunities. Look for further gains in investment, production, exports and employment.

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