Manufacturers have announced more than $90bn worth of investments in the US to take advantage of its cheap natural gas, according to new calculations, underlining how the shale revolution appears to be driving the country’s industrial renaissance.
Petrochemicals, fuel, fertiliser and steel companies are among those that have committed to or are considering multibillion dollar investments based on their ability to source cheap energy and feedstocks.
The US investment boom has caused concern among manufacturers in Europe, who fear they will find it difficult to compete in energy-intensive sectors. The British government set out an attempt to launch its own shale gas industry last week to help revive the moribund economy.
The shale boom is reinforcing other trends that are also increasing the competitiveness of US manufacturing, including relatively slow wage growth.
Greg Garland, chief executive of Phillips 66, the US chemicals and refining group, said the boom in the country’s shale gas and oil production was a “huge change” for the economy. “This revolution is creating great opportunities to increase manufacturing capability, and has tremendous potential for economic impact and job creation,” he said.
Dow Chemical, which has announced its own $4bn investment plan in petrochemical plants in Texas and Louisiana, has calculated the total value of announcements in the past two years or so at $90bn-plus.
Advances in the techniques of horizontal drilling and hydraulic fracturing have unlocked gas reserves that had not previously been accessible at commercially viable rates, enabling a boom in supplies.
The price of natural gas in the US dropped to a 10-year low in April this year, and although it has since recovered a little, at about $3.30 per million British thermal units it is still well below its peak above $13 in 2008.
Gas in the US is also cheaper than in Europe or Asia, where cargoes of liquefied natural gas are being sold for about $16 per mBTU.
Many of the largest investments in the US are in petrochemicals facilities that make use of the natural gas liquids such as ethane that are produced from gas and oil wells.
The price of ethane, a feedstock used for many plastics and other products, has fallen in the US from about 80 cents a gallon at the start of the year to less than 23 cents today.
Industry executives say low-cost feedstocks and energy are already having an effect on the US economy.
Since the start of 2010, industrial production is up 12 per cent in the US, while it has fallen 2 per cent in China, 3 per cent in Britain, and 6 per cent in Japan.