Shale gas is a "once-in-a-lifetime opportunity" for U.S. manufacturing, says Bayer Corp. CEO Gregory Babe. The chief executive of Bayer AG's North American division told IW that shale gas could play a critical role in bringing U.S. manufacturing back to its former glory. For chemicals manufacturers such as Bayer, the new abundance of natural gas has created energy pricing predictability. The chemicals industry is a large consumer of natural gas, both as a raw material and energy supply.

"Predictability in energy prices has always been one of the things we've clamored for," Babe says. "Predictability allows us to plan appropriately, allows us to make decisions about where to site a plant -- either in the United States or outside of the United States."

Bayer and other manufacturers across North America are riding a natural gas wave that's been referred to by some industry experts as the "shale gale." Advances in new, and sometimes controversial, technologies have allowed oil and gas developers to extract natural gas from shale formations across North America more easily.

 

Workers move a section of well casing into place at a Chesapeake Energy natural gas well site near Burlington, Pa. The region is rich in natural gas locked underneath shale gas formations that experts say could be a boon to manufacturing.
Photo:AP/Ralph Wilson

The largest shale gas repository in North America is the Marcellus formation that's primarily located in New York, Pennsylvania, West Virginia and Ohio. Others include Haynesville in the Southeast, Eagle Ford in Texas, and Horn River and Montney in Canada. The shale boom should contribute to an expected record for natural gas production in United States this year, says Donald Norman, economist and council director for the Manufacturers Alliance/MAPI.

IHS Cambridge Energy Research Associates estimates that unconventional gas plays in North America contain more than 51 trillion cubic meters of recoverable gas. That's more gas than has been produced in North America since 1930, according to the IHS Energy Vision Update 2011 report on natural gas trends.

Shale gas exploration picked up after Hurricane Katrina in 2005 when natural gas prices spiked to as high as $15 per million BTUs, says Kevin Swift, chief economist and senior director at the American Chemistry Council. Today, prices hover around $4 per million BTUs.

Swift, whose association represents members of the $674 billion U.S. chemicals industry, says the Katrina aftershocks created demand for more natural gas supplies. That, coupled with improvements in production technologies called hydraulic fracturing and horizontal drilling, were key drivers of the current natural gas boom in the United States.

Swift and many other representatives of energy-intensive industries see long-term benefits from shale gas exploration. More natural gas supplies have helped chemicals producers lower their raw materials costs, enabling them to double their exports as a share of total production over the past four years, Swift says.