United States Oil and Gas Chemicals Market Trends

Market Driver - Increasing Production of Crude Oil

The rapid rise in oil production across the U.S. has significantly boosted domestic supplies of raw materials for the oils and gas chemicals industry. According to the U.S. Energy Information Administration, U.S. field production of crude oil increased from around 11 million barrels per day in 2010 to nearly 13 million barrels per day in 2021.

With much of this additional oil coming from prolific shale reserves unlocked by advances in hydraulic fracturing and horizontal drilling, petrochemical manufacturers now have greater access to affordable feedstocks close to home.

As a result, production of basic petrochemicals and derivatives such as ethylene, propylene, benzene and xylene that serve as building blocks for numerous consumer and industrial products has grown commensurately over the past decade. This expansion in chemicals output has been led by major industrial hubs along the U.S. Gulf Coast that have a strategic advantage as they are located near major oil and gas fields as well as existing infrastructure for transport and export.

Market Driver - Expansion of Shale Gas Exploration

The expansion of shale gas exploration through hydraulic fracturing or fracking has been a major driver for the growth of the United States oils and gas chemicals market over the past decade. By extracting shale gas from tight rock formations deep underground, vast new sources of natural gas have become accessible across large parts of the country. This has substantially increased domestic natural gas production and transformed the United States into a net exporter of Liquefied Natural Gas (LNG) in recent years.

The commissioning of all this new shale gas-based chemical production capacity is driving tremendous volume growth across the entire downstream product chain. According to the U.S. Energy Information Administration, U.S. production of ethylene, the predominant basic petrochemical used as a feedstock for plastics, synthetic rubber, and other products, rose from 13.8 million metric tons in 2010 to over 19 million metric tons in 2020. This trend is expected to continue as major facilities like Shell's Pennsylvania Petrochemicals Complex reach full operation over the coming years. 

Market Challenge - Geopolitical Issues in the Middle East Region

The geopolitical issues in the Middle East region have created significant challenges for the growth of the United States oils and gas chemicals market in recent years. The ongoing conflicts and tensions amongst countries in West Asia have led to instability across the region. This heightened political uncertainty has disrupted trade routes as well as exploration and production activities for oil and gas.

Several parts of the Middle East like Syria, Yemen, Iraq and Libya have witnessed prolonged periods of civil war and unrest over the past decade. This has drastically reduced oil production from these nations. According to data from the US Energy Information Administration, Libya’s oil production declined from 1.2 million barrels per day in 2010 to under 0.1 million barrels per day in 2020 due to the volatile security situation.

Similarly, Iraq could not produce close to its capacity of 4 million barrels per day due to militant attacks and internal conflicts. The supply shortages created by the conflicts have supported higher global oil prices which negatively impact the competitiveness of chemical products manufactured using oil and gas.

Market Opportunity– Exploration of New Oil Fields

Exploration of new oil fields could bring tremendous opportunities in the United States oils and gas chemicals market. As per the Energy Information Administration (EIA), approximately 75% of the crude oil reserves in the United States are yet to be discovered. Tapping into these undiscovered reserves can help boost domestic production and reduce reliance on imports. Several frontier areas such as the Eastern Gulf of Mexico, Atlantic Outer Continental Shelf and Alaska offer high potential for sizeable discoveries. Exploring these regions requiring advanced technologies including 3D seismic surveys and horizontal drilling can open up new frontiers of growth.

Successful exploration of lucrative fields will also attract major investments in midstream and downstream sectors. New oil production will need to be transported through expanded pipeline networks and processed in new or upgraded refineries as well as petrochemical plants. This will stimulate massive capital investments and create numerous jobs directly in the E&P sector and also in associated infrastructural areas.