The new boom:
Rise of natural gas
The shale gas revolution is firing up an old-fashioned American industrial revival, breathing life into businesses such as glass, steel and toys.
MLADEN ANTONOV/AFP/GETTY IMAGES - Workers change pipes at a drilling rig exploring the Marcellus Shale outside Waynesburg, Pa. in April 2012.
And no industry better demonstrates just how much has changed in a short period of time. Chemical-industry employment slid 17 percent from January 2002 through January 2011, according to the Bureau of Labor Statistics.
In October 2005, after Hurricane Katrina pounded Louisiana, the price of natural gas had spiked to $14 per thousand cubic feet. Supplies were scarce even before the storm, and Dow Chemical had temporarily shut down one of its biggest petrochemical plants.
Shale gas production is increasing.
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“We say it unequivocally — the U.S. is in a natural gas crisis,” Dow Chemical chief executive Andrew Liveris said in Senate testimony at the time. “The hurricanes have dramatically underscored the problem, but they did not cause it.” Natural gas prices, once $2 per thousand cubic feet, had soared sevenfold. Gas accounted for half of Dow’s costs, he said.
“We simply cannot compete with the rest of the world at these prices,” Liveris added. “We and others are now investing in China and the Middle East, where energy is much cheaper, to our incredulity. Our industry will continue to grow. It’s simply a question of where we will grow.”
Among the deals it made: one with Kuwait and a $20 billion joint venture with Saudi Aramco to build facilities in Saudi Arabia using cheap gas found along with oil there.
Today, Dow Chemical is drawing up plans to construct a plant in Freeport, Tex., and is restarting a plant in St. Charles, La. And year-end nationwide chemical-industry employment has edged up for the first time in a decade, the Bureau of Labor Statistics says.
Methanex chief executive Bruce Aitken said natural gas prices made moving operations to Louisiana attractive.
“The proliferation of shale gas in North America has resulted in a structurally low natural gas price environment, which underpins the very attractive economics for this project,” he told investors in a July 26 conference call.
He said moving the methanol plant from Chile to Louisiana will pay off in less than four years if gas prices stay around $4 per thousand cubic feet. He said the company was considering moving a second plant from Chile to Geismar, La.
CF Industries was also lured by the price and proximity of natural gas in Ascension Parish. Gas makes up about 70 percent of manufacturing costs at its ammonia and urea units. The company said the site is served by five pipelines at prices set at the nearby Henry Hub, which is the nationwide benchmark for spot gas prices.
Foreign companies are also eyeing U.S. natural gas.
In September, a large Egyptian construction company announced that it would build a new nitrogen fertilizer production plant in southeast Iowa to supply customers in the U.S. Corn Belt. Cairo-based Orascom Construction Industries, one of the world’s largest fertilizer makers, said the $1.4 billion plant would be “the first world-scale, natural gas-based fertilizer plant built in the United States in nearly 25 years” and would reduce U.S. dependence on imported fertilizers.
After years of losing manufacturing jobs, most American communities are vying to lure industries.
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