Those banking on reviving Appalachia with shale gas and plastics would do well to think again, says a new report. A resource glut and competition from renewables are liable to make the former unprofitable, while market forces are seriously reducing the odds of the latter’s success.
Citing a new report by the U.S. branch of the Stockholm Environment Institute (SEI) and the Ohio River Valley Institute (ORVI), DeSmog writes that natural gas prices are likely to remain too low for new ventures in the Marcellus Shale region, while “volatile market conditions for plastics” are undercutting Appalachia’s plans to become a petrochemicals-for-plastics powerhouse.
“Appalachia—already suffering from a long, drawn-out bust in the coal industry—has for much of the past decade seen natural gas prices languish as drillers pumped too much gas out of the ground,” DeSmog reports. “And a renewed price surge appears unlikely as gas faces growing competition from solar and wind.”
Citing the U.S. Energy Information Administration, DeSmog writes that an estimated 39.7 GW of new electricity capacity is scheduled to come online in America in 2012, “with solar accounting for 39% of that total capacity, wind accounting for 31%, and batteries making up an additional 11%.” Natural gas will capture the remaining 16%.
And those looking to the overseas market should consider that global demand for LNG “has also seen incredible volatility in recent years, forcing a wave of delayed and cancelled LNG projects.”
And the bad news for Appalachian fossil ventures doesn’t end there: competition in an ever-narrowing market is intense, and “Qatar, the world’s largest LNG exporter, just announced a massive US$29 billion expansion of its industry, which will grow its export capacity by a third.”
As for the claim that gas is more climate-friendly than coal, the SEI/ORVI report concludes that LNG will have only a “limited role to play” long term, due to methane leakage and other climate-harming factors in the industry.
With domestic and foreign prospects looking dim for Appalachian gas, the region’s drillers are “down to petrochemicals as their main hope to clear the regional glut of gas”—that is, they are pinning their fortunes on processing natural gas liquids (NGLs) into ethane, a fundamental building block for plastics.
“But this sector, too, is suffering from incredible volatility, with plastics prices falling over the past few years as supply growth worldwide outpaced demand,” writes DeSmog.
A massive Shell ethane cracker on the shores of the Ohio River in Beaver County, Pennsylvania, is scheduled to begin operations next year, but it “could be the first—and the last—for the region,” as another multi-billion-dollar cracker planned 120 kilometres downriver remains stalled. The builder, Thai petrochemical giant PTTGC, has repeatedly struggled to find investment partners.
“The risks are becoming insurmountable,” Tom Sanzillo, director of finance at the Institute for Energy Economics and Financial Analysis (IEEFA), said in a release last year. “The price of plastics is sinking and the market is already oversupplied due to industry overbuilding and increased competition.”
A year later, things remain the same, if not worse, especially as concerns about plastics use and waste continue to deepen. Bans on single-use plastics are particularly bad news for those hoping to make the ethylene market the endpoint for Appalachian shale gas.
A final icing on the cake: hopes to move at least some of that gas to potential markets in the southeast are being stymied by ongoing pipeline woes, with the Mountain Valley Pipeline, which is essential to that purpose, currently standing as a weathervane for observers.
“It is over 90% complete but has been hit with legal and regulatory delays and still faces questions about whether it will be finished,” DeSmog writes.