Fitch: Unconventional gas production likely spur to US manufacturing

The ongoing shale boom and increasing use of hydraulic fracturing has comparative advantages that could drive US manufacturing growth, said Fitch Ratings analysts who believe low natural gas prices provide a competitive advantage for petrochemicals, steel, and other energy-intensive industries.

The primary effect of shale gas will be lower costs for US industry and consumers and expanded capacity and profits for certain manufacturers. Fitch also sees the cooper, aluminum, and cement industries as benefitting from low gas prices.

“Petrochemicals benefit most from lower prices for natural gas as it is both the raw material and the source of energy for US petrochemicals producers,” Fitch said. The US petrochemical industry, based on gas, is expected to be more competitive than the European industry, based on oil.

“This appears to be a permanent advantage,” analysts said in a Jan. 10 special report on shale entitled “Shale Boom: A boost to manufacturing but not to energy independence.”

Coal-fired power generation is unlikely to disappear in the US.

“In the short run, low gas prices translate into low wholesale power prices because gas-fired plants are the price-setting, marginal cost-plants in most regions,” Fitch said. “This makes many coal-fired plants uncompetitive. This has already led to a number of defaults of coal-fired electricity producers—and the resurrection of Calpine, a gas-fired producer.”

Even with growing US gas production from shale, Fitch does not expect coal production will contract significantly, and foresees an eventual rebound when market conditions improve. While coal will have a smaller share of the US electric generation, it still will be the biggest single energy source, Fitch said.

Analysts noted that not all the coal displacement is related directly to gas prices. About 12% of coal-fired capacity is being retired because of the power industry’s inability to support environmental investments needed to comply with US clean-air standards.

Currently, utilities are paying about $2.50/Mcf for gas compared with $8/Mcf in 2008, Fitch said. The manufacturing recovery also is being driven by forces other than low natural gas prices, such as the recession and depreciation of the US dollar, Fitch said.

Contact Paula Dittrick at paulad@ogjonline.com.

Related Articles

EPA delays proposal to regulate methane emissions until 2015

12/19/2014 The US Environmental Protection Agency is delaying plans to issue proposals to regulate methane emissions from oil and gas operations until 2015, O...

BLM starts process to consider new Nevada lease nominations

12/19/2014 The US Bureau of Land Management’s Battle Mountain, Nev., field office is seeking public comment on 197 parcels of public land, totaling 415,921 ac...

California Bay Area advances plan for enhanced refinery regulations

12/19/2014 California’s Bay Area Air Quality Management District (BAAQMD), the public agency responsible for regulating stationary sources of air pollution in...

IEA finds US energy policy improved in latest in-depth review

12/19/2014 US energy policies have come into sharper focus in the last six years, the International Energy Agency said in its latest periodic review. It speci...

Comstock to suspend 2015 oil drilling in Eagle Ford, TMS

12/19/2014 Due to low crude oil prices, Comstock Resources Inc., Frisco, Tex., plans to suspend its 2015 oil-directed drilling activity on properties in the E...

Mexico uses PSCs in first Round One step

12/19/2014 Mexico is offering production-sharing contracts to companies incorporated in the country for exploration of 14 shallow-water areas in Round One bid...

BASF, Gazprom cancel asset swap

12/19/2014

BASF and OAO Gazprom have agreed not to complete an asset swap that was scheduled for yearend.

AWE pulls out of Otway permit

12/19/2014 AWE Ltd., Sydbey, has decided to pull out of Perth-based junior WHL Energy Ltd.’s offshore Otway Basin permit Vic-P67 after a series of time extens...

Jewell names Maryland energy administrator BOEM’s new director

12/18/2014 US Interior Sec. Sally Jewell appointed Abigail Ross Hopper, who currently directs the Maryland Energy Administration, as the new director of the U...

White Papers

AVEVA NET Accesses and Manages the Digital Asset

Global demand for new process plants, power plants and infrastructure is increasing steadily with the ...
Sponsored by

AVEVA’s Approach for the Digital Asset

To meet the requirements for leaner project execution and more efficient operations while transferring...
Sponsored by

Diversification - the technology aspects

In tough times, businesses seek to diversify into adjacent markets or to apply their skills and resour...
Sponsored by

Engineering & Design for Lean Construction

Modern marketing rhetoric claims that, in order to cut out expensive costs and reduce risks during the...
Sponsored by

Object Lessons - Why control of engineering design at the object level is essential for efficient project execution

Whatever the task, there is usually only one way to do it right and many more to do it wrong. In the c...
Sponsored by

Plant Design for Lean Construction - at your fingertips

One area which can provide improvements to the adoption of Lean principles is the application of mobil...
Sponsored by

How to Keep Your Mud System Vibrator Hose from Getting Hammered to Death

To prevent the vibrating hoses on your oilfield mud circulation systems from failing, you must examine...
Sponsored by

Duty of Care

Good corporate social responsibility means implementing effective workplace health and safety measures...
Sponsored by

Available Webcasts


On Demand

Optimizing your asset management practices to mitigate the effects of a down market

Thu, Dec 11, 2014

The oil and gas market is in constant flux, and as the price of BOE (Barrel of Oil Equivalent) goes down it is increasingly important to optimize your asset management strategy to stay afloat.  Attend this webinar to learn how developing a solid asset management plan can help your company mitigate costs in any market.

register:WEBCAST


Parylene Conformal Coatings for the Oil & Gas Industry

Thu, Nov 20, 2014

In this concise 30-minute webinar, participants have an opportunity to learn more about how Parylene coatings are applied, their features, and the value they add to devices and components.

register:WEBCAST


Utilizing Predictive Analytics to Optimize Productivity in Oil & Gas Operations

Tue, Nov 18, 2014

Join IBM on Tuesday, November 18 @ 1pm CST to explore how Predictive Analytics can help your organization maximize productivity, operational performance & associated processes to drive enterprise wide productivity and profitability.

register:WEBCAST


US HYDROCARBON EXPORTS Part 3 — LNG

Fri, Nov 14, 2014

US LNG Exports, the third in a trilogy of webcasts focusing on the broad topic of US Hydrocarbon Exports.

A discussion of the problems and potential for the export of US-produced liquefied natural gas.

These and other topics will be discussed, with the latest thoughts on U.S. LNG export policy.

register:WEBCAST


Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!

 

Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected