April 2016

SHALE GAS AND NEW U.S. CHEMICAL INDUSTRY INVESTMENT: $164 BILLION AND COUNTING

U.S. Chemical Industry Global Cost Advantage Relative Position of U.S. (2005-2015)

(Petrochemical Production Costs)

2015 P

RO

DU

CT

ION

C

OST

S

Est

imate

d *

($/lb

.)

GLOBAL SUPPLY

(billion lbs.) *Based on estimates from best available data

HIGH

LOW

MIDDLE EAST

UNITED STATES IN 2015

CHINA

WESTERN EUROPE

OTHER NORTHEAST ASIA

RELATIVE POSITION OF UNITED STATES IN 2005

30-year supply that can be

profitably produced at $4.00

per million BTUs or less

U.S. chemical industry

benefits from lower costs for

energy and feedstock

264 projects and $164 billion in

potential capital investment

announced as of April 2016

40% completed or underway,

55% in planning phase

61% is by firms based outside

the U.S.

ACC data IHS data

U.S. Shale Gas Chemical Investment

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

Natural Gas Liquids Key to U.S. Cost Advantage

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

Oil-to-Gas Ratio: A Proxy for U.S. Petrochemicals Competitiveness

Oil price declines

have created some

economic uncertainty

Current ratio remains

very favorable for

U.S. competitiveness

Growth likely to slow,

but be offset by

stimulative consumer

effect

When the ratio is above 7, U.S. competitiveness is enhanced.

Sources: EIA, ICE, NYMEX

0

5

10

15

20

25

30

35

40

45

2005 2010 2015 2020

Oil-t

o-G

as

Pri

ce R

ati

o

Oil and Gas Ratio: A Proxy for U.S. Petrochemicals Competitiveness

Cumulative Announced Chemical Industry Investments from Shale Gas

$0

$20

$40

$60

$80

$100

$120

$140

$160

$180

0

25

50

75

100

125

150

175

200

225

250

275

300

Total Investment Number of Announced Projects

Billions Number of Projects

Source: ACC analysis, Dec. 2010 – March 2016

U.S. Chemical Industry Output from Shale Gas-

Related Investments

$0

$20

$40

$60

$80

$100

$120

10 11 12 13 14 15 16 17 18 19 20 21 22 23

Billions of 2015 Dollars

• By 2023, additional output from

$164 billion in capital investment

generates more than $106 billion per

year in new chemical industry

shipments

• This is an ongoing, permanent

upward shift in shipments

The Build-Out is Underway (Chemical Industry Construction Spending)

$0

$5

$10

$15

$20

$25

$30

$35

$40

$45

$50

94 96 98 00 02 04 06 08 10 12 14

Tho

usa

nd

s

$ Billions, SAAR, 3MMA

Note: Data are presented as a 3 month moving average to smooth month-to-month variations.

Source: Census Bureau

$301 billion 738,000

Economic Contributions From Increased Chemical

Industry Investment

Permanent NEW jobs throughout the

U.S. economy by 2023 from $106 billion

in new chemical industry output

Permanent NEW U.S. economic output by

2023 from $106 billion in new chemical

industry output

Based on $164 billion in cumulative U.S. chemical industry investment completed, underway, or planned as of April 2016

Unconventional Energy Benefits the U.S.

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

Household income: $3,500 more in 2025

due to unconventional energy

Jobs: Nearly 4 million jobs supported in

2025, up from 2.1 million in 2013

U.S. GDP: Grows 3.2% by 2025, equal to

$500-600 billion

IHS report measured economic

benefits of unconventional oil and

natural gas activity across value chain

Household Income

50

60

70

80

90

100

110

120

130

140

150

1987 1992 1997 2002 2007 2012 2017 2022

United States Western Europe Japan

U.S. Is Capturing Market Share Away From

Western Europe

Chemistry Production (2012=100)

Sources: Eurostat, Federal Reserve, METI, ACC analysis

U.S. Outpacing Europe

“Natural gas prices in Europe are three times as high as in

America, and electricity prices are twice as high…It's very

hard to imagine how Europe can recover.”

- Paolo Scaroni, CEO, Eni

I think we’d be making a big mistake if we didn’t think hard

about how to encourage [natural gas production] right here

in the UK. We’re seeing businesses that have previously

gone off to Mexico and elsewhere come back to the U.S.”

- David Cameron, British Prime Minister

“Chemicals depend upon competitive energy and feedstock

costs…It could well be another European dinosaur.”

- Jim Ratcliffe, Chairman, INEOS

“When people choose whether to invest in Europe or the US,

what they think about most is the cost of energy. The loss of

competitiveness is frightening.”

Antonio Tajani, European Industry Commissioner

$14B in NEW, PERMANENT

federal, state, and local

tax revenue from

increased chemical

industry output

(by 2020)

Nearly $30 Billion Projected increase in

Net Exports of U.S.

chemicals

(2014-2030)

Rapid Growth in Net Exports of

Key Shale Gas-Advantaged Chemicals

Net exports of shale gas advantaged chemicals will grow due to increased chemical industry investment in the U.S. As of April 2016, $164 billion in U.S. chemical investment is completed, underway, or planned.

President Obama pledged to facilitate permitting of new manufacturing plants

Congress should enact “all of the above” energy policy

Natural gas, energy efficiency, and energy recovery are key parts of any national strategy

White House and Congress Must Help

Access & Infrastructure: Allow access to natural gas reserves on government and private lands. Ensure reliable infrastructure to transport supplies

State Regulations: Implement responsible, state-based regulations that avoid undue restrictions on natural gas production

Permitting: Ensure timely approval of permits for manufacturing projects and investments such as new chemical plants and expansions

Tax Treatment: Maintain accelerated depreciation in tax policy. Minimize cost and reduce complexity for businesses

Policies Needed to Realize Potential