American Oil and Gas Reporter - March 2017 - 88

ConventionCoverage: Pennsylvania Independent Oil & Gas Association

Market For Gas, NGLs On The Ascent
PITTSBURGH-This time, Tom Gellrich told the Pennsylvania Independent
Oil & Gas Association, a shock means
great things for the U.S. economy.
The 1970s oil shock reverberated
throughout the U.S. manufacturing sector,
and in the course of a decade, helped cut
the number of U.S. manufacturers by
more than 30 percent, recounted Gellrich,
an analyst with TopLine Analytics. Fortunately, he continued, U.S. manufacturing
now appears likely to grow by a similar
proportion thanks to the shale shock.
By harnessing unconventional oil and
gas, U.S. producers have revived more
than the energy sector, he suggested.
They also have energized the country's
industrial base. Moreover, he held, Pennsylvania and the rest of the Marcellus
Shale region appear likely to be the epicenter of that manufacturing upswing.
"North America has seen close to a
fourfold decrease in the price of natural
gas," he described. "I believe that is going
to lead to a change in manufacturing on
the same scale we saw previously. We
are going to see a 30 percent increase-
probably much more than that-in manufacturing coming to North America."
Gellrich was among several speakers
who discussed markets for natural gas
and natural gas liquids at PIOGA's winter
meeting. Others whose remarks focused
on the subject were:
* Denise Brinley with the Pennsylvania Department of Community & Economic Development;

* Robert H. Beatty from "O" Ring
CNG Fuel Systems LP;
* David Fair of SMC Business Councils;
* Petra Mitchell from Catalyst Connection; and
* Bill Polacek with JWF Industries
and Environmental Tank & Container.
Plastic Paint Cans
Energy-intensive businesses such as
steel and glassmaking are encouraged by
the Marcellus and Utica plays, Gellrich
indicated, but chemical companies see
even greater opportunity. "That industry
not only uses methane, but also ethane,
propane, butane and more as raw materials
or feedstock," he described. "As much as
90 percent of some chemicals' costs are
attributable to the raw materials that come
out of shale gas; and on the low end, it
may be 60 percent. That is still twice the
advantage enjoyed by other energy intensive businesses."
Therefore, North America is becoming
a magnet for chemical manufacturing,
he said, and not even the Middle East
can compete. The chemical industry has
responded with a series of very significant
U.S. investments-60 percent of which
originate from foreign countries-that will
expand North American chemical capacity
by 50 percent, he detailed. "During the
last several decades, the chemical industry
has been spending $5 billion-$10 billion
a year," he reported. "It is now on a path
to invest $40 billion a year in new plants

U.S. consumers are going to
encounter more plastic products and containers, predicts
TopLine Analytics analyst Tom
Gellrich. According to Gellrich,
the effect of facilities such as
the ethane cracker plant Shell
plans to open in Beaver County,
Pa., will ripple throughout the
North American economy.

88 THE AMERICAN OIL & GAS REPORTER

and infrastructure."
A $2.60 average ethylene price offers
U.S. operations a better than twofold
edge in an industry that fights for a
percent advantage, Gellrich detailed. He
cited the $6 billion that Shell Chemical
Appalachia was investing to build an
ethane cracker in Beaver County, Pa.,
which will produce around 1.8 billion
tons a year of polyethylene. "Shell broke
the ice," he characterized. "It validated
the location and demonstrated value."
Moreover, he continued, the cracker
plant projects to occupy less than 10 percent of the site's several thousand acres.
Some of that land will remain undeveloped
to serve as a buffer to the nearby community, he allowed, but the extra space
also allows for expansion.
Moreover, he noted, not all of that expansion needs to be Shell's. Some of
Shell's customers will want to locate
their facilities nearby. "You can bet they
are talking to Shell about building on its
site," Gellrich suggested. "Shell would
like nothing better than to expand its site
to reduce its (share of) costs."
Such tributaries will spur more economic expansion, he emphasized. Processors will take in plastic pellets on one end
and send out plastic parts on the other, he
described. "One cracker can feed 300 or
more plastics processing plants," Gellrich
estimated. "Each one is going to have
300 permanent jobs and 900 indirect jobs.
That is where the real growth will be."
He told PIOGA it was likely everyone
in the audience already had touched more
than 20 plastic items during the day's
initial hours, including light switches,
toothpaste tubes, tooth brushes, steering
wheels, lanyards, pens, and coffee stirrers.
Many of those items come from China,
he said, but that will change. Soon,
Gellrich predicted, a far greater proportion
of the plastics Americans already use
will originate in this country, while other
plastic products will proliferate further.
"Go to the supermarket and notice
how many containers are made of glass,
metal or paper," he advised. "Go back in
five years and see how many of those are
plastic. Go to your local home center to
buy a can of paint. In a few years, all
those metal paint cans will be plastic.
"The bigger changes will come from
major substitutions," he predicted. "Plastic
composite decking products are premium.

American Oil and Gas Reporter - March 2017

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