Shale gas expansion a global game changer

The predicted spike in energy production from shale gas reserves is not only attracting domestic attention, but international interest as well. Even steelmakers are chasing the boom to lower their production costs.

In February Asia’s biggest power utility, Tokyo Electric Power Co., announced plans to purchase up to 1.2 million tons of liquefied natural gas per year through terminals in Louisiana. The purchase is being made via Mitsui & Co. and Mitsubishi Corp.

Asia, which accounts for 30% of global consumption, is taking advantage of U.S. natural gas prices at 10-year lows. Meanwhile, GAIL India Ltd. and EDF Trading, a French energy trader, formed a partnership to purchase more than $1 billion in U.S. shale gas assets.

U.S. Energy Information Administration

“The exploration activities, particularly in the Gulf of Mexico, has economic implications not only for domestic use at home, but internationally through free trade,” said John Malsch, sales manager for Automation Engineering Co.

Unconventional sources like shale have led to the creation of 1.7 million American jobs so far, according to a study by IHS Inc. It is projected to grow to 3 million jobs by the end of the decade. Chemical companies, such as Chevron Phillips, Dow Chemical Co., and Mitsubishi Chemical Holdings Co., have announced $15 billion in expansions in Texas alone, taking advantage of natural gas produced in shale plays.

“As OCTG companies are seeking technologies for ecologically safe production of shale gas, we are helping steelmakers identify safe, controlled solutions to handle pipe,” Malsch said. “Horizontal drilling and hydraulic fracturing call for high-tech, premium threads and more durable pipes and assemblies.”

Steelmakers Voestalpine AG, Nucor Co., Bluescope Steel Ltd. and Essar Global Ltd. are planning to build new direct-reduced iron plants in the United States, according to Bloomberg-compiled data. Using gas instead of coal to purify iron ore has significant cost advantages and can add to the smoothness and durability of steel.

According to Nucor, the new method to purify steel can produce iron for about $324 a ton, a 20% savings. Nucor’s $750 million DRI plant in Convent, La., is on track to open in mid-2013.

The U.S. Energy Information Administration projects U.S. natural gas production to increase from 23 trillion cubic feet in 2011 to 33.1 trillion cubic feet in 2040.