By Erich Schwartzel
Seventeen chemical, metal and industrial manufacturers have told shareholders this year that demand for shale gas is driving demand for their products. That’s in contrast to just three years ago when no manufacturer did.
The rapid-fire development of natural gas extraction is starting to bear fruit for the manufacturing sector hurrying to build the compressors and pipes that take the gas to market, according to a report released Wednesday by PricewaterhouseCoopers.
Analysts reported that U.S. manufacturing companies could hire about 1 million new employees by 2025 because of shale industry needs and lower energy costs brought on by the extra natural gas.
The report looked at shale plays across the country, including the Marcellus and Utica shale formations that underlie Appalachia and have attracted massive industry activity since 2005. Much of the gas is now accessible through hydraulic fracturing technology that splinters the rock and allows gas and oil to escape.
Manufacturing interest already has started in the region as companies spend money on infrastructure that treats and transports natural gas.
Bayer Corp., a German company with U.S. headquarters in Robinson, is in talks with chemical companies to open an ethane cracker plant in the middle of the Marcellus Shale region. Cracker facilities break down gas compounds into other elements, such as ethane.
Shell Oil said it plans to build a petrochemical refinery in the region. A specific location is expected to be announced next month.
Shareholders can expect manufacturing activity to be concentrated near shale plays, said Jay Timmons, president and CEO of the National Association of Manufacturers, but certain “components and inputs could be made anywhere in the country.”
Increased attention for the Utica Shale, which is concentrated in eastern Ohio, has so far yielded some $745 million in investments from two companies, U.S. Steel and Vallourec, building steel plants nearby that can cater to pipeline clients.
The increased supply of natural gas should lead to lower expenses for all kinds of manufacturers, said Bob McCutcheon, PricewaterhouseCoopers’ U.S. Industrial Products leader. Manufacturers consume about one-third of the nation’s energy output, he said.
With energy costs among manufacturers’ top-five expenses, the cheaper price of natural gas could reduce natural gas expenses by up to $11.6 billion annually through 2025, the report said. Natural gas currently trades around $4 per Mcf — or about one-third the price seen several years ago.
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