These companies all rely heavily on natural gas. And across the country, companies like them are crediting the sudden abundance of cheap natural gas for revving up their U.S. operations. Thanks to new applications of drilling technology to unlock natural gas trapped in shale rock, the nation’s output has surged and energy experts almost unanimously forecast that prices will remain low or moderate for a generation. The International Energy Agency says that by 2015, the United States will overtake Russia as the world’s biggest gas producer.....
AND HOW IS THIS DONE? FRACKING:
Despite concerns about water pollution risks linked to hydraulic fracturing of shale, drilling and production have soared.
The United States is rife with these shale plays, some rich in natural gas and others rich in oil. The United States is still producing less oil than in 1971, and prices are high. But the country is producing more oil than in any year since 1994, and production is rising.
Meanwhile, natural gas production has jumped to record levels. In 2000, shale gas was 2 percent of the U.S. natural gas supply; by 2012, it was 37 percent.
Natural gas supplies suddenly look bountiful enough to last a century at current consumption rates, the National Petroleum Council said in a report last year. Some advocates of natural gas have called it a “bridge” to a clean-energy future because its greenhouse gas emissions are half those of coal and because gas plants can start up quickly and pair with wind and solar to provide a reliable alternative to coal....
For environmentalists, the abundance of shale gas poses a political and environmental dilemma. As new gas supplies fuel more and more industrial plants, new constituencies will have stakes in gas production, making it politically harder to impose new regulations. The Environmental Protection Agency is weighing whether to issue additional federal guidelines on various disruptive aspects of shale gas drilling, including the disposal of toxic water used to fracture formations and air pollution from drilling operations. The EPA might also issue rules requiring drilling techniques that would make contamination of water aquifers less likely.
But one thing is clear: Tumbling natural gas prices have changed every calculation and assumption about the energy business.
Petrochemical reaction
Perhaps no one benefits more from low natural gas prices than the petrochemical industry, which relies on natural gas as a feedstock and as a source of power. Natural gas, in turn, produces the building blocks for other products, including paints, solvents, plastics, packaging, inks, dyes and lubricants....
Once some of these basic industries come home, companies further down the value chain could return, too.
“If you make plastics in the United States, there are a bunch of things produced in China that might tip back to being produced in the U.S.,” said Harold L. Sirkin, a senior partner at the Boston Consulting Group.
“You could think about toys,” he said. “We talked to a few companies thinking, ‘Does this mean I can re-shore some toy production to the U.S.?’ The energy cost in plastic toys is reasonably high. And the labor content is relatively low because we’re talking about automated injection molding facilities.”
Chinese exporting factories could be vulnerable, especially given the risks of intellectual property theft, transportation costs and long supply chains.
“All of a sudden, the equations start changing about where you produce things,” Sirkin said. “Even in industries where the cost structure includes only 1 or 2 percent electricity, that could make the difference.”
