As the U.S. economy continues to sputter, America’s chemical industry motors along.
A recent report by Stanford’s Energy Modeling Forum, for example, estimated that robust and sustainable supplies of natural gas will increase America’s gross domestic product by about $70 billion a year over the next several decades. The “principle industry that will benefit from less expensive natural gas,” according to the report, is the chemical sector:
These gains will be concentrated in a few important sectors, particularly the oil and gas extraction, chemical product and various supporting industries. The shale boom will revitalize these sectors, which were relatively stagnant prior to the first signs of the shale boom in 2006. Manufacturing in the downstream supply-chain using domestic low-cost plastics and petrochemical products (for local or export markets) may in particular benefit from these developments.
In Gulf Coast states, reality may exceed Stanford’s projections. Louisiana and Texas are enjoying the benefits of plentiful supplies of inexpensive natural gas as a platoon of petrochemical companies based in Europe is either expanding operations or planning additional investments in the two states. Six new “world-scale crackers required to turn the ethane from natural gas into ethylene are slated for construction in Texas and Louisiana,” according to a recent news report.
“It’s a huge deal,” Joe Chang, global editor of ICIS Chemical Business, told Allegheny Front. ICIS has estimated the U.S. capacity to make ethylene, a key ingredient in manufacturing products, will expand 38 percent in the next few years. “It really has changed everything in the chemical sector,” he added.
BASF and Norwegian-based Yara International ASA are in discussions about constructing a “world scale” ammonia plant somewhere on the Gulf Coast. Ammonia can be used in the manufacturing of everything from fertilizers to home furnishings. According to the Houston Business Journal:
News of BASF and Yara’s possible joint venture follows the trend of foreign chemical companies rushing to invest in Gulf Coast chemical plant expansions to take advantage of cheap shale gas, which is used as a feedstock for many chemicals, including ammonia.
Dan Borne, president of the Louisiana Chemical Association, emphasized the job benefits derived from the chemical industry expansion, which cascades throughout the manufacturing sector:
If you would take a rock and drop it in a pond, that rock would make a splash and then there would be ripples. That’s what happens with these chemical plants. One job … creates five others working for contractors, suppliers, the people who make the pumps and valves needed to make those plants run.
As of early September, 126 chemical industry projects worth $84 billion in capital investment have been announced, 54 percent of which are foreign direct investment in the United States.
Given those numbers, the chemical industry really is driving economic growth.
