Maps of fracking activity, using a combination of horizontal drilling and hydraulic fracturing to extract gas from dense rock formations, show numerous areas in the United States where there are large fields, or plays, where the gas is thought to be concentrated and accessible. The largest is the Marcellus play, which covers much of New York, Pennsylvania, West Virginia and Ohio. Other large plays are centered in Michigan, North Dakota, Colorado, Wyoming, Oklahoma, Ark ansas, Indiana and Texas. This is making it possible to unlock vast reserves of oil and gas trapped underneath sedimentary rocks, or shales. As a result, domestic oil and gas production has soared, leading to an oversupply in the U.S. natural gas market, and decade-low prices for the commodity. The U.S. chemical industry has two primary uses for natural gas -- as a raw material, or "feedstock," and as a way to power its facilities. As prices have declined, natural gas has become increasingly attractive for both purposes. Since the mid-2000s, many domestic chemical makers lost competitiveness and were forced to idle their plants. After decaes of coping with volatile and rising natural gas prices, current low levels have benefited chemical makers, providing them with a significant competitive advantage over their overseas counterparts. Amid high oil prices, naphtha-based plants shell out almost upto US$1200/ton to produce ethylene. In sharp contrast, ethane-based plants can produce ethylene at almost 50% of that. In 2012 alone, ethane prices have plunged by almost 70% and recently slipped to their lowest level in at least five years. This wide price disparity between ethane and naphtha has provided U.S. chemical firms with a massive cost advantage and plenty of incentive to relocate back to the United States.

An abundant supply of inexpensive natural gas-based feedstocks coming from North America’s highly productive shale plays is revitalizing the polyethylene (PE) industry, according to a new IHS Chemical report. As a result, North American producers of PE resins are establishing a competitive advantage in a highly competitive global market expected to continue from 2012 to 2017 study period. IHS noted that global demand for the PE resins in 2012 is 79 mln metric tons (MMT) or 38% of the 208 MMT currently produced in the global thermoplastic market. Polyethylene demand growth has been moderating since 2010, when global consumption increased by 8.4% or nearly 8.6 MMT. Nonetheless, at an estimated 3.4% growth rate for 2012, the rate of increase will exceed global GDP growth this year and throughout the forecast period. Global demand for PE is expected to grow from 79 MMT in 2012 to 99 MMT by 2017, driven largely by increased demand in high population growth Asian countries and the rapid economic development of numerous transition countries in the Asia Pacific region (including China, India and Indonesia), Central Europe, the Middle East and South America. As these countries or regions move toward more consumer based economies, plastics usage in general is forecast to increase. As in previous years, China is the largest importer of PE, accounting for over 40% of the additional global demand for PE. The country's average annual consumption of PE resins is projected to grow an average of more than 7% annually - from 19 MMT to 27 MMT during 2012 to 2017. China imports more than 40% of its polyethylene requirements and, despite the start-up of massive capacity projects over the next five years, will continue to import more than 8 mln metric tons of polyethylene pa from 2012 to 2017. During the next 25 years, China will add an additional 35 MMT of polyethylene consumption, and by 2035, China's per capita consumption will likely match the current levels of developed countries. By comparison, the report notes that Western Europe is projected to advance at an average annual growth rate of only 1.6% through the forecast period. As a result, major exporters within the Asia Pacific region, the Middle East and the U.S. will continue to benefit from China's insatiable appetite for external polyethylene. The increasing availability of advantaged ethane feedstock from shale gas in the U.S. has prompted almost all major North America polyolefins producers to announce ethylene or PE capacity additions that will come online within the next five years.

Shell, Dow, ChevronPhillips, Equistar, Formosa, Oxy, Westlake, Williams, Nova and INEOS are all planning to either expand existing facilities or build new greenfield complexes. In addition, the arrival of large additional volumes from the Middle East is putting increasing pressure on high-cost producers in Europe and Asia. Current estimates project cumulative global additions of over 47 mln metric tons (MMT) of polyethylene capacity by 2022. Film and sheet production, which covers a multitude of end-uses including food packages, trash bags and stretch and shrink films, consumes more than 50% of PE resins produced, making it by far the largest application for PE plastics. Blow molding and injection molding combined consume 25% of PE resins, with their individual shares almost equally divided. High-density PE (HDPE) blow-molded bottles used for milk, juice, motor oil, and laundry detergent are the largest single end-use within the blow-molding category. Pipe and profiles is the only other major demand segment for PE, accounting for 7% of the global polyethylene consumption, with end-use generally concentrated in the construction industry. Low-cost feedstock from shale gas is revitalizing the polyethylene business, making PE exports highly competitive globally. Many of the target export regions are investing in export-oriented plastics converting capacities, which will also help fuel polyethylene demand growth. In more mature markets such as Western Europe, the industry will see consolidation, operations optimization and movement toward production of higher value, performance products, since much of the profitability upside for ethylene producers comes from export of these high-value plastic resins.