Texas' Petrochemical Industry Will Export 33% More Ethylene and Finished Plastics Overseas

Fueled by cheap natural gas liquids from the Eagle Ford Shale -- primarily ethane -- Texas' petrochemical industry will export 33% more ethylene and more finished plastics overseas by 2017, a report by the Federal Reserve Bank of Dallas said last week. 

Ethylene is made by cracking ethane found in the natural gas stream and is a basic building block for vinyl and polyethylene plastics. 

Texas already accounts for 12% of the US' plastics exports, the paper by the bank's Houston-based business economist Jesse Thompson said, and Texas accounts for 72% of the country's ethylene capacity. 

Of the 11 ethane cracker expansions and new builds announced for the US, 10 are proposed for the Gulf Coast states of Texas and Louisiana, Thompson said, all driven by a strong export market and a 40% drop in ethane prices to their lowest level in 20 years. 

Worldwide, plastics from ethane are cheaper than plastics made from oil-based naphtha, giving Texas a strong cost advantage on the world market, Thompson said. 

"The value and tonnage of Texas' petrochemical exports have grown over the last decade on strong global activity," Thompson said. "More recently, shipments have soared on cost advantages and foreign markets' relative attractiveness." 

"Overall, greater domestic ethylene production capacity will significantly outstrip projected domestic demand over the next several years," Thompson said. "As a result, US petrochemical exports, particularly from Texas, will expand significantly." 

"The US -- with Texas at the forefront -- has become a highly effective place to invest in new petroleum plants, even is the market for that new production is in emerging economies," Thompson said. 

Thompson also points out that all the new brown- and greenfield-construction has a significant regional economic impact with Gulf Coast laborers making $25/hour up to $40/hour for specialists. Manufacturing and selling the machines and pipes used in building new petchem plants also provides work to US firms, Thompson said.