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The shale gas boom that has transformed the fortunes of energy companies is also giving US manufacturing a shot in the arm.The price of natural gas in the US has been cut in half from three years ago after new drilling techniques uncorked extra output. In Asia, where markets are pegged to oil prices, gas costs three times more. The supply trend has begun to reverse the fortunes of energy-hungry US industries. Factories mothballed as prices broke records in the past decade have begun to reopen and some manufacturers are breaking ground on new plants.

Dow Chemical plans to open new US ethylene and propylene plants later this decade, and restart a Louisiana ethylene cracker closed in 2009. Royal Dutch Shell announced a chemical plant in the gas-rich Appalachian mountain region to make ethylene and petrochemicals. Sasol of South Africa last week unveiled a plan to convert gas into diesel fuel in Louisiana.

In the fertiliser industry, Potash Corporation of Saskatchewan is investing $158m to restart a Louisiana anhydrous ammonia plant shut in 2003, when gas prices were climbing. Aluminium company Ormet is dusting off a nearby plant shuttered in 2006.

“When the price of gas comes down, it certainly ripples through our economy,” says Mike Eades, president of the economic development corporation in Ascension parish, near the PotashCorp and Ormet facilities in Louisiana.

The investments come as the US gas market faces regulatory challenges. Extracting gas from shale rocks involves injecting water, sand and chemicals at high pressures thousands of feet underground, raising concerns it will pollute drinking water. Some states have imposed moratoria or restrictions on the technology, while the Environmental Protection Agency is studying potential impacts. A government advisory panel last month urged disclosure of what is in fracturing fluid.

The US government has also authorised the first major exports of liquefied US gas, potentially narrowing the gap between cheap domestic and foreign markets. When the first project won preliminary approval in May, an industrial energy consumers’ association objected, saying: “Natural gas is not like other exported products such as manufactured goods.”

Cheap gas is no panacea for high US unemployment. Manufacturers employ 9 per cent of the non-farm workforce, and chemicals manufacturing employs only 0.6 per cent, or 781,000 people.

The new gas economics are favourable for industries that use a lot of it. Gas is the main input for nitrogen fertiliser, such as urea. North America shut down half its nitrogen production capacity early in the last decade, and imports now satisfy half its demand.

Stephen Wilson, chief executive of fertiliser producer CF Industries, says: “For the first time in decades, American manufacturers of nitrogen fertiliser and other energy-intensive products are in a position to contemplate building new plants and hiring new employees if the regulatory environment accommodates it.”

Gas is also a key petrochemical feedstock. “It’s probably the single greatest factor for the US petrochemical industry in terms of our competitiveness internationally,” says Cal Dooley, chief executive of the American Chemistry Council.

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