Ancillary Benefits of a "Golden Age of Gas"
On Monday, the International Energy Agency (IEA) released a report entitled “Are We Entering a Golden Age of Gas?” Much of the initial coverage on the report has been focused on the potential for natural gas to displace coal in the power sector, and IEA’s conclusion that increased use of natural gas “on its own” will not limit average global temperatures from rising by 2 degrees Celsius.
While the coverage is focused generally on these two conclusions, the IEA report also discussed the potential for natural gas to replace coal and oil in the industrial sector. The report projects that natural gas demand will increase by approximately 75% in the industrial sector by 2035. The increased demand for natural gas in the industrial sector is driven largely by non-OECD countries, primarily by China as it transitions from coal to shale gas. One particular sub-sector that could use more natural gas is the chemical industry. The report notes that with stable prices chemical companies could replace natural gas with oil as a feedstock into petrochemicals. India, in particular, could boost demand for natural gas as a feedstock in fertilizer.
While IEA’s report centered on the growth of natural gas usage in non-OECD countries, a recent American Chemistry Council (ACC) study suggests that new shale production could provide domestic chemical companies with significant economic benefits. U.S. chemical manufacturers primarily rely on ethane and propane derived from natural gas liquids as a feedstock to produce ethylene, which is used in thousands of consumer products from tires to clothes. Stable natural gas prices can provide U.S. chemical companies with a competitive advantage over European companies, many of whom rely on naphtha, a more expensive feedstock derived for crude oil. ACC’s study noted that U.S. plastic exports increased by 10% in 2010 due in part to low prices for ethane. The study projects that a 25% increase in ethane supply would generate the following benefits:
- 17,000 jobs in the U.S. chemical industry;
- 395,000 jobs indirectly related to new investment and production in the chemical sector; and
- $4.4 billion more in federal, state and local tax revenue.
This study demonstrates the potential economic benefits of increased natural gas usage in the chemical sector, while not even noting the energy security and climate benefits of decreased usage of oil.
Reports such as IEA’s focus understandably on the power sector in discussing increased shale gas production. Increased natural gas usage in the industrial sector, however, also offers significant economic, energy security and environmental benefits both domestically and internationally.
http://www.climatechangeinsights.com/admin/trackback/250693
