This article focuses on the resurgence of three industries; Chemical, Pharma and Nuclear. Thirty-five years ago, these industries were booming in the USA, providing high paying jobs for skilled trades and professionals. Twenty years ago, there began a mass exodus of Chemical and Pharma plants leading to the term offshoring. Today, both are coming back home to the USA. This is welcome news for those of us in heavy industry, for our national security, and for the health of our national economy. The primary reason for their return may be found in a hole full of wet gas.
The Nuclear power industry suffered a huge setback after 3 Mile Island, with over 100 nuclear plants being abandoned. A handful were 98% completed after regulations and specifications continued to change, forcing expensive change orders during construction. The average cost for a nuclear generation plant from approval to startup was over $10 billion, with 15-20 years construction. Each site would have as many as 12,000 craft workers with another 4000 in professionals and support staff on site. Utilities walked away from $1 trillion in construction spending. The last two units to come online were Southern Company’s Units 1 and 2 in 1987 and 89. Ironically, Southern Company would be the first to break ground in the new nuclear age with Units 3 and 4 in 2009. The collapse of the nuclear industry was barely noticed as the chemical and pharmaceutical industries exploded with new plant construction throughout the country.
Glass lined steel played a big part in the marketplace starting in late 80’s. Pharmaceutical plants were under construction – expanding everywhere – and chemical plants were ordering new reactors to meet global demand. Hoffman La Roche approved construction of its new plant in Florence, SC in 1989. Takeda Expanded its sprawling 900 acre Wilmington, NC facility with the construction of a $350 million plant to make the purest vitamin C compound in the world. GE Plastics purchased 6000 acres outside Montgomery, Al to build its high-grade Lexan polycarbonate plant as its most ambitious construction project ever, at over $450 million in 1980 dollars.
Often no expense was speared in fast tracking a project. In order to meet startup requirements a Chattanooga. TN project expedited a 4000 gallon high pressure reactor weighing over 48,000 lbs. on a Boeing 747 from Paris France to Atlanta for immediate delivery to Chattanooga. Equipment manufacturers earned premiums for early delivery of equipment, conversely penalties applied for late delivery. On site craft worked long hours of 60-72 hours per week with overtime being of no issue.
The growth atrophied beginning in the mid-90s as industries discovered “offshoring” in the late 90s.
Government regulations in the USA drove up costs and risks for manufacturers. The public complained about plants that had been in existence decades before suburbia sprung up adjacent to their property lines. The reaction was obvious. Large corporations would search the globe for sites free from all the regulations effecting profit margins in the USA. Mexico saw a brief surge in processing facilities through NAFTA. By the end of the 90s, China attacked the chemical industry by exporting low cost compounds to North America that forced many companies to close or restructure.
Chemical and pharmaceutical plants of old have been shuttered as processes relocated overseas. The Chattanooga plant is now a field and the 4000 gallon reactor is now operating in a plant in Mexico. The Takeda Vitamin C plant could not compete with low quality, low cost product imported from China. In less than 15 years the 900 acre site was devoid of all equipment. During this period, Glass Lined Technologies, Inc. dismantled over 30 chemical processing plants for companies as large as BASF, and removed equipment from abandoned super fund sites.
Used equipment distributors filled lay down yards throughout the country. After buying idled plants for pennies on the dollar equipment dealers were flush with processing equipment, much of which was unused. The largest global manufacturer of enameled steel reactors systems reduced employment from 1100 to less than 100 at its U.S. based facility. In 2001 the third largest enameled reactor company closed its doors leaving this country without a U.S. based manufacturer of glass lined steel equipment. The chemical and pharmaceutical industries rely upon glass lined steel in the processing of almost all compounds effecting our daily lives were left facing extended lead times of up 6 months for delivery of critical parts. New system delivery would be much longer.
All chemical processing was under duress as recent as 2008 when weekly articles claimed the U.S. had achieved peak oil production. Crude oil and natural gas prices increased costs for many daily products, fertilizer a basic agricultural necessity doubled in price. Fuel costs climbed to new highs. . High prices for crude derivatives led to processing companies scrambling for solutions. GE sold its Lexan division to Sabic (Saudi Arabia Basic Industries Group) as it realized the spike in cost of crude necessary to produce the popular polycarbonate Lexan had negative impact on margins for a product sold on an annual contract basis. Sabic began to close its 6000 acre site just west of Montgomery Alabama, employees were laid off and told they should look for alternative work as the jobs will not be back.
WTI, West Texas Sweet Crude climbed above $100/barrel for the first time in Feb 26 2008. $90/ oil was seen as the new floor. The high oil prices stressed many companies further, and quietly created a boom in spite of government policy to restrict exploration. Known shale reserves became profitable to extract as the dollars for hydrocarbons stayed in country. Extra dollars funded development of new and more efficient technologies to explore and recover hydrocarbons. By 2011 the shale boom had led to modern day boom towns around the Marcellus, Bakken, Eagle Ford, and Permium Basin fields. But there was a golden lining to these dark clouds of manufacturing emigration – the discovery of huge reserves of shale gas, and most importantly, wet shale gas – that could be economically extracted.
Neither fracking nor directional drilling is a new development. Fracking had been first performed as an experiment in 1947, and directional drilling was first applied in 1934. Advances in downhole drilling motors and control created a more cost effective method to direct the well bore through targeted zones as deep as 25,000 feet below the surface. Fracking is the process of pumping large volumes of water, chemical solutions and sand at pressures as high as 10,000 psi to create fissures in the geologic formation. The combination of these improvements to drilling technology makes the extraction of hydrocarbons from shale formations economically viable. A secondary effect was a quiet boom in exploration, drilling, and recovery of hydrocarbons on private lands in spite of government policy to restrict exploration.
Natural gas is defined as dry or wet. As defined by the U.S. Energy Institute, the higher the methane content the drier the gas. Wet gas contains less than 85% methane with a higher percentage of LNG’s ethane and butane. The combination of LNG’s and liquefied hydrocarbons gives it the “wetness.” Wet gas contains less than 85% methane with a higher percentage of LNG’s ethane and butane. The combination of LNG’s and liquefied hydrocarbons gives it the “wetness.”
Unnoticed and under reported in the media, U.S. oil and gas production began to skyrocket to the point of becoming the world’s largest oil producer – contrary to reports a few years earlier of peak oil. Previous boom and bust cycles associated with production in the U.S. had created a very efficient recovery capability including the processing and delivery network.
New energy production naturally spawns construction of the energy infrastructure. There are 142 operable refineries in the U.S., with the largest processing over 600,000 barrels daily. North Dakota recently announced a large scale crude refinery has been approved for construction. US infrastructure includes over 2.5 million miles of gas and oil pipelines. In comparison, China has 32,000 miles in place.
Current supply far exceeds demand. New supply coupled with the benefit of 100 years on infrastructure investment yields low cost energy. The recent gas plays discovered have placed the U.S. in an incredibly unique position on a global scale.
The U.S. is holding over 880 trillion cubic feet of technically recoverable reserves. China is reporting 360 trillion cubic feet; gas plays in China are 3-4 times deeper than typical wells in U.S., explaining the difference in price. Middle East holds large reserves. Russia holds large reserves of gas, although capital investment in that country can be an uncertain gamble. Argentina holds a respectable amount of gas as well; politically it is in the throes of a 2nd default that is becoming increasingly ugly.
Ethylene is necessary in the production of everything from toothbrushes to tires. 2013 ethylene production was at least 150 million tons by at least 117 companies in 32 countries. To meet the ever increasing demand for ethylene, sharp increases in production facilities are planned. Dow Chemical recently announced construction of its largest ethylene plant in Freeport, TX
Global entities seeking a business-friendly climate with a wealth of gas are now looking at construction of facilities in the U.S. Gas reserves in the U.S. are estimated to provide 200 years of feedstock. The graph below details materials dependent upon shale gas.
“Much of the U.S. chemical industry is based on ethylene, a feedstock produced by cracking ethane and higher hydrocarbon components of natural gas liquids. Because the supply of natural gas in other countries is limited, many European and Asian companies use naphtha as a feedstock. Naphtha a more expensive product derived from crude oil. With a consistent supply of feedstock assured, the US advantage is clear. “Ethane cracker” plants produce the raw material needed for plastics and chemicals manufacturing. Proximity to shale gas deposits lowers the production costs for cracker plants. The shale gas boom is already producing huge results for these manufacturers: the ethane supply in the United States has increased fourfold.” Note 1
As of July 1 2015 , The ACC reports 238 US chemicals companies have announced over $150 billion in new projects throughout the U.S up from $90 billion in 2014. 61% of the new investment in the U.S. is in the form of foreign companies. The impact of shale gas is expected to create over 6 million jobs by 2030. The return of the nuclear generation industry is confirmed with five plants under construction, five seeking permits and 24 in the planning stages at a minimum of $10-14 billion each. Japan and Germany have closed nuclear plants in favor of LNG.
As ethane and propylene feedstock plants are built, we will see additional projects for everything from plastics for automobiles to pharmaceutical drugs. South African based Sasol recently announced development of a plastic internal combustion engine.
Growth and expansion put pressure on the used processing equipment inventory which is now at a historical low. Companies searching for existing equipment are forced to search other continents. New equipment suppliers are quoting 6-8 months for delivery. To support the the demand in processing equipment overseas, manufacturers are now looking to build fabrication facilities in the U.S. to supply critical processing equipment. Glass lined Technologies Inc. remains the only U.S. based manufacturer of glass lined processing equipment providing reglass services at our facility in Greensboro GA.
Free enterprise built the infrastructure necessary to capitalize on the shale gas boom. This natural resource bounty will have a huge impact in for jobs and businesses as the money spent for energy remains within our borders. The shale gas boom can be a long term source of economic prosperity driving demand for those in skilled in trades, engineers, technologists. The USA will enjoy a new era of manufacturing, this time on shore. Our government should seize this opportunity to support this tide that can raise all ships.
President Glasslined Technologies, Inc.
706 454-1701 ext 101
1 Calvin Dooley,“ $100 Billion and Counting: Shale Gas and New U.S. Chemical Industry Investment,” 2014:
Manufacturing: Study: Manufacturers benefit from low cost US Natural Gas
Univ Michigan: Shale Gas: Game changer for U.S. manufacturing