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US Plastic Industry Set to Grow with $30 Billion Investment in New Factories

We often think of oil and gas being used to provide fuel for power plants in order to create electricity, or to create petrol and diesel for running vehicles; but oil and gas are also vital for other products such as producing plastics.

Due to the shale gas boom natural gas prices in the US are the lowest in the world, outside of the Middle East. Chevron Phillips Chemical Co., a new joint venture company created between Chevron Corp and ConocoPhillips, believes that the plastic industry could invest $30 billion into constructing factories within the US to convert the natural gas into plastics such as ethylene. Ethane is a component of gas used to make ethylene, the most popular and widely produced petrochemical in the industry. Prices of ethane are very low, having fallen 36 percent this year at Mont Belvieu, Texas, to just 52 cents a gallon; and with more shale formations being developed from Colorado to West Virginia, prices are only expected to decrease further.

Mark Lashier, executive vice president at Chevron Phillips, said that the yield of natural gas liquids such as ethane from the shale formations currently running can support five new processing plants, each which will cost about $5 billion to $6 billion and will be built over a decade. Chevron Phillips is constructing a new $5 billion ethylene plant in Baytown, Texas, to be completed by 2017, as well as two new polythene plants. Other companies with plans to build new plants include; Dow Chemical Co., Sasol Ltd., Formosa Plastics Corp. and Royal Dutch Shell Plc.

The cheap gas is attracting so much attention because it is hugely advantageous, not only as a cheap raw material for producing the plastics, but also as a fuel to power the factories.

With these plans to vastly increase the production capacity of plastics in the US the volume of exports will also increase. Therefore new infrastructure will be needed to handle the increased shipments.

By. Charles Kennedy of Oilprice.com



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