Over the course of 2010, we covered the US shale gas revolution in considerable detail, examining a number of game-changing developments and investment opporrtunities.

Pugh Clauses and Shale Gas Activity and Why Some Natural Gas Is Worth $7.28, for example, focused on the apparent disconnect between drilling activity, which continued to increase, and depressed natural gas prices. The articles explained how efforts to secure leased acreage by production and the coproduction of high-value condensate and natural gas liquids (NGL) ensured that some shale plays were economic even with natural gas at historic lows.

We also discussed how the uptick in shale gas drilling activity had created an imbalance between the supply of pressure pumping equipment and industry demand, while outlining a number of high-profile mergers and acquisitions in the space. (See Big Fracking Deals: Investing in Shale Gas Production.)

The oversupply of natural gas also provided ample ground for analysis. A series of articles, Cheniere Energy Partners and LNG Exports and Energy Investing: The Global LNG Market, focused on the havoc US shale gas production has wrought in the markets for liquefied natural gas. Finally, The Future of Shale Gas Is International explored foreign interest in US shale plays and the potential to export these production techniques to European and Asian markets.

Despite our robust coverage of the shale gas revolution, we overlooked the implications for the petrochemicals industry, a group that stands to benefit from increased NGL production and offers a convenient hedge for investors with exposure to ethane prices.

With natural gas prices at depressed levels, many of the independent producers operating in shale plays have announced plans to shift their focus from dry-gas fields to those that are rich in oil, NGLs and condensate.

Chesapeake Energy Corp (NYSE: CHK), for instance, unveiled a plan to grow its liquids production to 57,000 barrels per day by 2012, an increase of roughly 200 percent from current levels. Management expects much of this growth to come from stepped-up drilling activity in the Eagle Ford Shale of south Texas and Colorado’s Niobrara Shale. The largest shale gas operator is hardly alone in this strategy: Producers small and large have acquired acreage in NGL-rich areas to diversify their production mix.

The reason for this tectonic shift is pain to see: Liquids-rich plays offer superior economics. As SM Energy’s (NYSE: SM) Chief Operating Officer noted at the Johnson Rice & Company Energy Conference, the company’s typical well in the Eagle Ford Shale return almost $7.50 per million British thermal units (BTU) when dry gas trades at $4.30 per million BTU. Quite simply, fields that contain primarily natural gas can’t compete with these economics.

That’s why rig counts in the Eagle Ford increased by more than 100 percent in 2010, while the number of rigs in Louisiana’s Haynesville Shale declined by 13 percent–a trend that should continue in 2011.

With US NGL production on the rise, the petrochemical industry enjoys an abundance of light feedstock, which, though more expensive than natural gas, offers superior margins to naphtha and other crude oil-derived products. As you can see in the graph below, ethane offers the best margins for petrochemical firms.

Source: Enterprise Products Partners

Cracking facilities heat ethane with steam to produce ethylene, a key component in vinyl- and polyethylene-based products. The cost advantages enjoyed by domestic producers relative to companies in Asia and Western Europe have increased US exports of ethylene-related products dramatically.

Not surprisingly, the petrochemicals industry has rushed to expand its use of ethane, substituting the feedstock for oil-derived ones in a wide range of products. Meanwhile, companies have been scrambling to increase cracking capacity. Chevron Phillips Chemicals, a 50-50 venture between oil giants ConocoPhillips (NYSE: COP) and Chevron Corp’s (NYSE: CVX), recently restarted a cracking facility in Sweeney, Texas, while Eastman Chemical (NYSE: EMN) fired up a light-feedstock cracker that had been out of service since 2008.

Dow Chemical (NYSE: DOW), the world’s second-largest chemical outfit, in December announced plans to increase its ethane cracking capacity on the Gulf Coast over the next two to three years. The firm will also improve its ethane cracking capabilities by 20 to 30 percent to take advantage of the superior economics offered by the NGL.

For NGL producers, an increase in cracking capacity is essential to maintaining solid economics on ethane output; some industry observers have cautioned that supply could outstrip demand, depressing prices. Although the risk of such a situation is a few years away, lower ethane prices would boost margins in the petrochemical industry. The group also stands to benefit from the global economic recovery.