Economic Development in the Houston Bay Area
 
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Shale-led manufacturing renaissance to add millions in tax contributions to coffers of Bay Area Houston cities
05/22/2014

By C.A. Shields
BAHEP
Specialty Chemical
Marketing Manager


    Local manufacturing has been experiencing a resurgence lately, and much of the activity is due to new technologies in the exploration and extraction of gas and oil that, until recently, have been locked in tight shale rock formations thousands of feet below the earth’s surface making them too uneconomical to mine.
    Hydraulic fracturing, horizontal drilling, multi-well platform drilling, and other technological developments have led to the United States exporting more petroleum products, on an annual basis, than it imported for the first time since 1949. The abundance of low-cost natural gas has led existing companies to expand operations, and, for those companies not already taking advantage of the opportunity, to explore their options for relocating to the region.
    It is important to consider that natural gas is not just an inexpensive source of energy. It’s also a feedstock, the basic building block to over 93 percent of consumer goods. Chemical companies using natural gas derivatives as a feedstock to manufacture intermediate products, such as polyvinyl chloride, find the current economic conditions advantageous, because the cost of energy and feedstock is near historical lows allowing the total cost of production to fall.
    Oil and gas extraction operations have seen the largest increase in employment, and that has translated into significant growth in the midstream and downstream sectors, as companies rush to shore up transportation and processing infrastructure.
    Developing and emerging markets are also helping to drive U.S. domestic output as nations continue to advance, and newly created middle classes are expanding in places such as Brazil, China, India, and South Africa, which increases demand for feedstock, energy, and the consumer products their new lifestyle demands.
    Companies are also looking to export natural gas to areas of the globe which are experiencing much higher energy costs. One point of uncertainty for the equation is the exportation of natural gas to overseas markets and to what extent. Natural gas does not have a global market price and is much more costly to transport than crude oil. Companies are waiting to see how many liquefied natural gas plants the federal government will approve and the amount of the commodity the government will allow for exportation.
    Currently, Cheniere’s Sabine Pass facility in Louisiana is the only fully permitted export project, and it is scheduled to begin operations in 2015. Five other facilities have been granted conditional approval for the exportation of natural gas which would not see operation commencing until 2017 at the earliest.
    Some of the questions manufacturing companies have been pondering revolve around the dependable supply of natural gas, how much exportation will decrease supply in the domestic market, and how pricing will be impacted.
    However, one thing is certain. The shale-led manufacturing renaissance has already led to tens of billions in capital investment dollars to be spent along the Houston Ship Channel and in Bayport with thousands of new jobs being created.
    Current estimates for expansion and relocation projects place the capital investment number around $35 billion and the total number of direct jobs at 111,000 with an additional 154,000 indirect jobs.
    From all of these investments, it is expected that approximately $800 million in tax contributions will be produced, with many of those dollars flowing into the coffers of Bay Area Houston Economic Partnership’s member cities.



Cheniere Energy Partners is adding a natural gas liquefaction and export complex
to its existing import terminal near Sabine Pass.


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