Gas Buoys U.S. Chemical Industry Outlook

Dec. 20, 2010
Abundant supplies of domestic natural gas may open up more feedstock opportunities.

KEVIN SWIFT, chief economist of the American Chemistry Council, Arlington, Va., paints an upbeat picture on the prospects for the worldwide chemical industry through 2012 in his cover story. The global recovery continues to advance, he notes, particularly in developing countries such as China and India.


The outlook for U.S. chemical makers is positive, if not as heady as elsewhere, believes Swift. He foresees operating rates slowly rising this year from the 74% level of late 2010. Increasing demand coupled with some capacity reduction should boost utilization to 79% in 2012, he expects.

"The stage is set for improving operating rates and profit margins. This, in turn, could lead to moderate increases in investment in new plant and equipment in the United States," Swift says.

Longer-term, the prospects may be even brighter: "With improving competitiveness resulting from developments in shale gas, the United States may once again become a favorable location for investment."

"Vast new reserves of natural gas in shale reservoirs deep beneath our country have been discovered in the past five years. These shale reservoirs are now estimated to contain more than two quadrillion cubic feet of natural gas, more than doubling America's previously estimated natural gas reserves, and giving us close to a 200-year supply of clean, affordable, American natural gas," notes Aubrey McClendon, CEO of Chesapeake Energy in a column on the company's website

"Two quadrillion cubic feet of America's natural gas represent more energy than Saudi Arabia's 200 billion barrels of oil reserves -- but America's natural gas is much cleaner and 70% cheaper than Saudi oil," he adds. "In 2009, the U.S. passed Russia as the biggest producer of natural gas in the world, but how many Americans realize this remarkable achievement?"

The promise of this abundance of gas certainly hasn't been lost on major oil companies. Both ExxonMobil and Chevron have bought gas producers relatively recently "They were late to the table," says Sheila McNulty of the Financial Times. "Europeans and Asians have been eagerly snapping up acreage for several years now." For instance, in November Chesapeake Energy and China's CNOOC International finalized a project cooperation agreement in which the Chinese firm purchased a one-third interest in Chesapeake's Eagle Ford Shale project in South Texas.

New Energy Saver Columnist Debuts

This issue contains the first Energy Saver column by Veerasamy Venkatesan. Ven, who already serves as the steam and thermal systems authority for our online "Ask The Experts" feature, is general manager of VGA Engineering Consultants, Inc., Orlando, Fla. He's a certified energy manager (CEM) and a U.S. Dept. of Energy-approved specialist in assessing steam and process-heating systems. He boasts decades of field experience related to plant operations and process engineering and has helped sites around the world. I'm sure you'll find his column interesting and valuable.

Ven replaces Gary Faagau, who has just taken a new job in industry. I wish him well and thank him profusely for sharing his practical insights these past couple of years.

Natural gas promises to largely displace coal for U.S. electricity generation by 2050, says a study, "The Future of Natural Gas," released in June by the Massachusetts Institute of Technology. Replacing the output of America's dirtiest third of coal-burning power plants with natural-gas-fired electricity would substantially cut pollution -- eliminating 600 million tons of carbon dioxide, 700,000 tons of nitrogen oxide, 1.5 million tons of sulfur dioxide, 19,000 tons of mercury and millions of tons of particulates each year, says McClendon.

The growing attraction of natural gas also may threaten the prospects of solar and wind for power generation, warns Dallas Kachan, managing partner of consultants Kachan & Co., San Francisco, in his December predictions for 2011.

On the feedstock front, natural gas long has served to make ammonia, methanol, ethylene, etc. However, the ample potential supply of the gas is prompting new interest as well as technical developments. For example, start-up Siluria Technologies, San Francisco, now is working on a proprietary catalytic process to directly convert natural gas into ethylene.

"The prospects of abundant and cheap natural gas ultimately may make the United States again a location of choice for new capacity," reiterates Swift.

MARK ROSENZWEIG is Chemical Processing's Editor-in-Chief. You can e-mail him at[email protected].