Experts square off on what must happen to overcome today’s energy crisis
Moves like this one have resulted in more than 100,000 well-paying jobs in the chemical industry disappearing, due in large part to a hidden “energy tax,” says Swift. These ramifications have hit the plastics sector especially hard, says William Carteaux, president and CEO of the Society of the Plastics Industry (SPI). “In addition to losing facilities and jobs, the plastics industry has lost over $14.5 billion in business between 2000 and 2005 due to the high cost of natural gas, which we also use as a feedstock,” he says. “In eight to 10 years we won’t have any industry left.”
The chemical industry’s natural gas bill rose from $5 billion in 1999 to $20 billion last year, cutting into money for new plants, jobs and research. But analysts say chemical engineers have what it takes to overcome today’s energy crisisBy Joy LePree As the energy challenge escalates to a near crisis state, the chemical industry is feeling a major pinch. While the ramifications of the high price of fuel and natural gas are frightening for this energy-intensive sector of the manufacturing industry chemical plants are moving overseas and hundreds of thousands of chemical industry jobs have been lost chemical engineers are somewhat lucky because they hold the key that unlocks the door to their industry’s salvation. Overcoming the problem requires the development of new sources of energy that mandate changes in chemical processing. Fortunately, chemical engineers possess the knowledge and expertise that can mastermind the solutions that will help their industry and the world beat the odds. Chemical industry organizations are also large and powerful enough to sway the government to initiate policies that can help provide relief.
Dire StraitsWhile the high cost of energy, especially natural gas, in the U.S. affects every American in the form of record-breaking heating bills and fast-climbing price tags on just about every manufactured product, it is especially troubling for the chemical industry. According to Jack Gerard, president and CEO of the American Chemistry Council (ACC), the chemical industry uses 2.5 trillion cubic feet of natural gas each year. This is more than 10 percent of the nation’s total consumption, making the chemical industry the largest industrial user of natural gas. While some of this is used to fuel and heat chemical facilities, a large percentage is used as a raw material. “Natural gas is to chemical manufacturing as flour is to baking,” said Gerard during testimony before the House of Representatives’ Subcommittee on Energy & Mineral Resources during a legislative hearing on the Outer Continental Shelf Natural Gas Relief Act last November. “Unlike other industrial users, which consume natural gas for fuel and power, we also use it as a starting block for our products and processes,” says ACC Chief Economist Kevin Swift. “In some cases, like ethanol processing, we use it directly. In other cases, we take natural gas, break it down and, through processing, it ends up in products like shampoo and telecommunications equipment. Ninety-six percent of manufactured goods contain chemistry, and chemistry contains natural gas. Therefore, almost everything you touch and see is made from natural gas.” Last year, the nation’s natural gas bill topped $200 billion. The chemical industry’s share was more than $20 billion, according to ACC estimates. By comparison, in 1999 when gas sold for $2 to $3 per million BTUs, the nation spent just over $50 billion and the chemical industry’s bill was $5 billion. Obviously, this steep increase isn’t good for the industry. The extra money spent on natural gas is money that hasn’t been invested in research, building new plants or creating new jobs. According to John Chen, president of the American Institute of Chemical Engineers (AIChE), the number of new petrochemical plants being built in the U.S. is drastically slipping. “The plants are moving overseas,” he says. “In 2003, the Middle East accounted for 42 percent of the new petrochemical plants, the Asia-Pacific region about 28 percent, Europe about 28 percent and the U.S., only 2 percent. That’s scary to me,” he says. “But who can blame them, they are chasing the natural gas feedstock.” In March, the U.S. price of natural gas was near $7 per million BTUs. In Saudi Arabia, it was 75 cents, says Swift. Chen isn’t the only one to notice the loss of U.S. chemical plants. A May 2005 Business Week article, titled “No Longer the Lab of the World: U.S. chemical plants are closing in droves as production heads abroad,” states that “of the 120 chemical plants being built around the world with price tags of $1 billion or more, just one a 1,725-acre polyvinyl chloride plant in Plaquemine, LA is in the U.S.” To bring the point home, Gerard tells the story of a $4 billion Dow Chemical plant being built in Oman. “That plant will employ 1,000 people in high-paying R&D, engineering and operations jobs. Until three years ago, that new plant and those 1,000 jobs were going to be built in Freeport, TX. Andrew Liveris, president and CEO of Dow Chemical, said the high cost of natural gas here now 12 times higher than it costs on the Arabian Peninsula is why Dow moved the project.”
|Time & Money: Two Big Stumbling Blocks When completely viable solutions abound for alternative sources of energy, the question that comes to mind is why isn’t U.S. industry embracing them? Two words: time and money. To get any or all of these ideas into play, it will take quite a bit of time to develop these technologies to the point of providing real relief. And, of course, research and development comes with a hefty price tag. Most experts feel that the chemical industry wields enough power to sway the government to increase access to sources of natural gas and oil in the deep waters of the Outer Continental Shelf in an effort to supply natural gas to the industry and the country during the time it takes to fully develop alternatives. “The most recent estimates show that there’s enough oil and gas in the Outer Continental Shelf to heat 100 million homes for 60 years or fuel 85 million cars for 35 years. Another estimate says there’s about 115 billion barrels of oil and 633 cubic feet of natural gas out there,” says William Carteaux, president and CEO of the Society of the Plastics Industry. “You can see there’s a lot of years of usage that, if we can get to it, can be used while we are developing alternative fuel sources.” The American Chemistry Council (ACC) is also asking the government to fund incentives for innovative energy technology to diversify the nation’s fuel portfolio. “Technologies such as gasification have the potential, over time, to fundamentally change the way the nation makes and uses energy,” said Jack Gerard, ACC president and CEO during testimony before the House of Representatives’ Subcommittee on Energy & Mineral Resources during a legislative hearing on the Outer Continental Shelf Natural Gas Relief Act last year. “Given gasification’s strategic potential, ACC believes it is especially critical for the DOE to design a successful gasification commercialization program and for Congress to fully fund that program.”|