Royal Dutch Shell is planning an ethane plant in the once-decaying steel valley of Beaver County, near Pittsburg. Dow Chemical is shutting operations in Belgium, Holland, Spain, the UK, and Japan, but pouring money into a propylene venture in Texas where natural gas prices are a fraction of world levels and likely to remain so for the life-cycle of Dow’s investments.
Some fifty new projects have been unveiled in the US petrochemical industry. A $30bn investment blitz in underway in ethelyne and fetilizer plants alone.
A study by the American Chemistry Council said the shale gas bonanza has reversed the fortunes of the chemical, plastics, aluminium, iron and steel, rubber, coated metals, and glass industries. “This was virtually unthinkable five years ago,” said the body’s president, Cal Dooley.
America looks poised to become the world’s biggest producer in 2014. It will approach the Holy Grail of “energy independence” before the end of the decade.
This is largely due to hydraulic fracturing – blasting rock with water jets – to extract shale gas and oil, though solar power and onshore wind are playing their part.
Europe is going in the opposite direction, drifting towards energy suicide. So is Japan as it shuts down its nuclear industry after the Fukushima disaster. China is more hard-headed, as it needs to be. The country is adding 20m cars a year. Chinese oil imports are rising by an extra 0.5m b/d annually.
As of last week, US natural gas prices were roughly one third of European levels. The German chemicals group BASF said it had become impossible to match the US on production costs.
Shale has made the US self-sufficient in gas almost overnight. The new twist of course is shale oil. Output has jumped to 2m b/d from almost nothing eight years ago. The Bakken field in North Dakota is twice as big as the conventional Prudhoe Bay field in Alaska.
America produced 81pc of its total energy needs in the first six months of this year, the highest since 1991. Citigroup thinks US ouput of crude and eqivalents will top 15.6m b/d by 2020, adding up to 3.6m jobs through multiplier effects. North America as a whole will reach 27m b/d – with Canada’s oil sands and Mexico’s deepwater fields – making the region a “new Middle East”.
The implications are momentous. America will no longer need a single drop of oil from the Islamic world. The strategic burden will fall on Europe, which is meekly disarming itself to meet Wolfgang Schauble’s austerity targets. Russia and China will be pleased to help.
What is staggering is the near total failure of Europe’s leaders to face up to this new world order, or to prepare for their energy crunch ahead. They have spent the last decade wrangling over treaties that nobody wants, endlessly tinkering with institutional structures, and ultimately holding 22 summits to “save” EMU, largely oblivious to the bigger danger ahead.
Germany is to shut down its nuclear plants by 2022, reluctant to admit that this can be replaced only by coal – and even then with great difficulty. It is opting instead for the romantic quest of a politically-correct grid. The goal is to raise the share of renewables from 20pc to 35pc by 2020 at a cost of €200bn, and then to green supremacy by mid-decade for another €600bn.
Germany seems to think it can power Europe’s foremost industrial machine from off-shore wind in the Baltic, without the high-voltage wires running from North to South yet built or on track to be built. “It is a religion, not a policy,” said one German official privately, warning that his country is already “very near blackouts”. He fears an almighty national disaster.