Gas Boom Rejuvenates Manufacturing

Share this article
The shale gas revolution is creating tens of thousands of jobs in states that are embracing the gas boom for what it is – a new abundance that makes America more competitive in important industries like chemicals and plastics.

Petrochemical companies are making multibillion-dollar bets to profit from the abundant cheap natural gas pouring out of shale-rock formations across the U.S. Making sure those plans pay off will be a focus of this week’s IHS World Petrochemical conference in Houston.

Natural-gas prices have plummeted in recent years as a new wave of supply has been unlocked from Texas to Pennsylvania through technological advances, including horizontal drilling and hydraulic fracturing. The low prices have been tough on some oil and gas companies’ bottom lines. But the trend has given chemical and plastics producers a reason to expand in the U.S., creating jobs and reviving a sector of the economy that many people had written off.

The manufacturing renaissance sweeping across the U.S. today is a shift from the turn of this century, when it seemed unlikely that new petrochemical plants would be built in places such as the coastal region near the Gulf of Mexico, according to Dave Witte, general manager of IHS Chemical, an energy consulting group.

The assumption was that new petrochemical plants and associated investments in plastics, rubber resins and metals manufacturing would be focused in Asia and countries rich in natural gas, such as Iran.

“There’s a lot more interest in what’s happening, and people are coming here to figure that out,” Mr. Witte said, pointing to expectations for record attendance at this year’s conference.

Executives from Dow Chemical Co., Exxon Mobil Corp.’s chemical operation and German chemical conglomerate BASF SE will make presentations.

Gases and liquids pumped out of the ground, including ethane, can be processed into chemicals that are made into products ranging from plastics and antifreeze to cosmetics. New petrochemical projects are under way, with Dow Chemical, Sasol Ltd. ,Phillips 66  and other companies building 48 factories and plant expansions, thanks to the plentiful natural gas now available in the U.S., the American Chemistry Council said.

The combined price tag for that construction: more than $100 billion, the council said. IHS Chemical estimated that $125 billion in petrochemical investments related to U.S. shale gas have been announced, with more likely to come.

In an about-face, the U.S. is drawing foreign manufacturing investments, Mr. Witte said. Inexpensive gas is luring Canada’s Methanex Corp. to pack up its one-million-ton-a-year methanol plant in Chile and move it to Louisiana at a cost of $550 million. But all that building could cause construction costs to balloon as companies compete for a limited supply of labor and materials, particularly in Gulf Coast states, according to IHS.

The resurrection of U.S. manufacturing in the service of developing the chemical sector and pumping more oil and gas—including building machinery and fabricating steel and iron—is breathing new life into major metropolitan areas, according to an IHS report released last week that was commissioned by the U.S. Conference of Mayors.

From 2010 to 2012, energy-intensive manufacturing sectors added more than 196,000 U.S. jobs and increased real sales by $124 billion in the nation’s metro areas, according to the report.

Steel plants across Indiana’s Rust Belt and from Birmingham, Ala., to Knoxville, Tenn., to West Mifflin, Pa., have more orders for metal. And machinery-sector growth exploded between 2010 and 2012, with Houston leading the way, followed by Chicago, Detroit, Los Angeles and Milwaukee, the report said. “That means jobs,” said Lansing, Mich., Mayor Virg Bernero. “There are still people who need jobs, and advanced manufacturing is the ticket.”

—Lynn Cook contributed to this article.

Wall Street Journal Online | updated March 24, 2014 |

Leave a Comment