Chemicals are Back!

The tsunami on the business horizon is the resurrection of the American chemicals industry. After nearly three decades of precipitous decline, the advent of low-cost natural gas is making investment in the production of energy-intensive chemicals very attractive…in America! Cheap energy from gas will change the industrial complexion of the U.S.A. in less than a decade. America has an opportunity to upgrade gas to higher value-added products, including many commodities. New chemical plants mean new labs, which must be staffed and stocked. Plus, returning manufacturing increases GDP.

In the fall of 2012, a dozen firms announced plans to build billion-dollar fertilizer plants in the farm belt. Other firms are gearing up to produce pigments, glass, and refined metals. Activity seems so great that one should be concerned about returning to the boom/bust cycle of undercapacity/overbuilding/overcapacity. Prices generally move out of phase to capacity, however. Now the price of natural gas is so low that chemical fertilizers can compete internationally. Witness the investment by Egypt’s Orascom Construction Industries in a $1.4 billion nitrogen fertilizer plant in Weaver, IA. Located near the Mississippi River, Orascom’s fertilizer could go anywhere.

The supply of natural gas is so plentiful that some firms seek to export bulk natural gas to less fortunate countries. Our policymakers should examine this option critically. Natural gas is best delivered by pipeline. The practical limit of pipelines from American fields is probably North and Central America. Both Canada and Mexico seem to be at least self-sufficient in gas, plus fracking in their fields would probably also increase their supply. After all, the oil-bearing formations in North Dakota extend north into Canada. So, let natural gas be an example of cooperation with our neighbors to the North and South.

Natural gas, even when liquefied, is expensive to transport by ship. Shipwrecks still occur. America should consider natural gas as a precious national resource and restrict bulk exports. But, we should encourage exports of upgraded products such as fertilizer, glass, cement, and metals including aluminum and steel. Even large server farms for data processing and cloud storage can be gas-powered. These farms require tens of megawatts of electric power. North America is an ideal location for farms, right in the middle of the most advanced market. Air transport is about the only major energy consumer where cheap gas will have little impact.

Critical reviewers are sure to point out that increased gas production and supply will contribute to global warming and dependent problems such as sea level rise and increasing storm intensity. While the cause is controversial to some, global warming appears to be a fact.

Some may note that global warming could be reduced and perhaps even controlled if the use of fossil fuels is reduced. Again, probably true. But even a well-intentioned few cannot hold back the tide of rising expectations from the five billion inhabitants of the developing world.

Democratization of the world means that the bottom will aspire for equality with the top. Those of us on top are not positioned to deny them effectively. Short analysis: Conservation lacks the political support to solve the problem, so it will not happen.

Mitigating environmental impact of combustion products

If we cannot control demand, we can strive to set an example of how to reduce the environmental impact of combustion products. Already, America has high standards. These are increasing yearly, based upon the best available science.

We need to be smart. If we ship crude products such as fuel to less-developed production sites, then we are effectively polluting our backyard. Since our atmosphere is a global system, it is in our interest to make sure that processing is as benign environmentally as we can make it. Better process it here, where we have control, and also it will increase our jobs and GDP.

Scrubber technology for CO2 sequestration

New scrubber technology is effective in recovering and concentrating CO2 from combustion exhaust. Combustion products are disposed of by injection into deep formations. Perhaps it makes sense to locate the combustion site over a suitable disposal site.

One idea for deep wells is to inject the exhaust gases back into the source formation. This would help maintain the pressure in the formation and possibly improve recovery by in situ supercritical fluid extraction (SFE).

Electric generation: Utilizing the grid

Another factor is distribution of energy via the grid is probably more economical and flexible than pipelines. Turbine-based electric generation is quick to install and remarkably efficient. Plus turbines come in a range of sizes, which can balance the capacity to the fuel supply.

One goal should be to replace oil and gas for surface transportation with electric vehicles such as the Chevy Volt. The grid economically decouples production of electricity from consumption. New batteries currently provide portability 200 miles/day. Driving range is expected to increase yearly for the next decade or two with stronger and lighter batteries.

Recycling water

Fracking also requires water. Both supply and disposal are a problem. Pennsylvania used 3.7 million gallons for fracking in 2012. However, since the water cost is so high ($400k/well) almost 17% was recycled. Recycling grew 4% last year. Since recycling technology is now accepted, growth in recycling in 2013 should be even faster. In late 2012, a report in The Wall Street Journal (11/19/12, pg B-1) described two options. The first is to recycle the water used in fracking and use the recovered water as feed in subsequent jobs. Another is to replace water with high-pressure air. There was no mention of the potential explosion hazard of mixing oil and air at high pressure. Diesel engines come to mind.

We need a national business plan to set the vision and supporting action items for implementation. Perhaps the Department of Energy should be tasked with coming up with an integrated plan in 18 months. The time is short since wells are being drilled and completed.

Hydraulic fracturing technology

Fracking was invented in the U.S. Currently we have a technological lead. Fracking is simple in concept, and the technology is still evolving. However, fracking technology for gas will probably be practiced globally within five years. We should develop a plan to take advantage of our unique lead in this technology. The plan should also include research into extending the lead in the fracking technology to include environmental mitigation of process inputs and outputs.

So, the chemicals industry is back! With proper support and guidance, it could grow vigorously in the next few decades. It will provide jobs and economic growth. If we do it right, we can reduce the environmental impact over what might occur in other locations with lower standards and technology. It is up to us.

Robert L. Stevenson, Ph.D., is a Consultant and Editor of Separation Science for American Laboratory/Labcompare; e-mail: rlsteven@comcast.net.

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