Being a dinosaur and unfamiliar with social media, I was asked to write a blog on something near and dear to my heart. Since beer has little to do with petrochemicals, I guess I should talk about shale development and what it means to manufacturing.
To the naysayers out there, shale development is not just about energy. There is stuff coming out of the ground that is used to make petrochemicals, which are building blocks used throughout a multitude of manufacturing supply chains. First, let me talk about the supply chain.
All manufacturing uses materials, whether they are found occurring naturally or synthesized in an industrial setting. Often the materials are made through a variety of steps until the resulting parts can be assembled. The manufacturing supply chain represents all of the steps in the process, including the distribution of the finished product.
So, in the case of shale development, the stuff coming out of the ground is a mixture of different chemical compounds generally referred to as hydrocarbons. Hydrocarbons are molecules that have carbon and hydrogen. Hydrocarbons come in different shapes and sizes, all ruled by physics, which give each molecule specific characteristics. The most fundamental and abundant molecule is methane, which has one carbon. Natural gas and methane are synonymous and easily removed from the rest of the mixture.
Natural gas is not only used for heating and to generate electricity, methane is also used to make ammonia, the chief building block for fertilizers. For years, US ammonia production declined and we had to import our raw materials for fertilizers. Now, however, domestic ammonia plants are being built as I write this. Methane is also used to make methanol, which is used as a building block throughout organic chemistry to make more sophisticated molecules that have very special functions. Natural gas has been found in such abundance that one company disassembled a methanol plant in Chile, brought it all the way up to Louisiana, and reconstructed it bit-by-bit to make methanol here in the States.
While methane is important, what really captures my interest is a mixture of hydrocarbons called natural gas liquids, or NGLs. NGLs contain hydrocarbons other than methane. Those hydrocarbons are named according to each additional carbon in the molecular chain (string of carbons that are joined together). The next three after methane, ethane (2 carbons), propane (3 carbons) and butane (4 carbons), are some of the most important feedstocks for the petrochemical industry. Petrochemical manufacturers take those simple molecules and use high-tech processes to break them apart and make new, very interesting materials called ethylene, propylene and butadiene. Notice the similarity in the names. Petrochemicals are named in a simple fashion so you can see where each is derived (ethylene comes from ethane, etc.).
So, what makes these petrochemicals so special? They are the most fundamental building blocks to make thousands of different chemicals and plastics, which are used throughout 90-some percent of all manufacturing. So, what’s the big deal?
Right now, methane is dirt cheap; in fact, the only place that has cheaper methane than North America is the Middle East. Ethane, propane and butane are also dirt cheap. The feedstocks and energy costs are so low here that many companies have already begun to build or expand new manufacturing facilities, which is actually the third phase in the Manufacturing Renaissance. The first two phases, shale development and the build-out of hydrocarbon processing and distribution facilities, are well underway. Companies have publicly announced more than $100 billion dollars in new petrochemical manufacturing infrastructure. Once those facilities are complete, the US will make some of the cheapest plastics in the world, as well as the specialty chemicals that give products their desired characteristics.
The next phase in the Manufacturing Renaissance will be the return of parts manufacturers taking advantage of inexpensive energy and materials. Unfortunately, most of these phases will not be apparent to people outside of manufacturing. Each phase takes 5 to 10 years to complete. But mark my words, it is happening and the only thing that can stop it is a lack of political will and bad policy decisions. I am a big believer in striking the right balance between safety, the environment and a strong economy. You cannot have a strong economy without a strong manufacturing base – we tried for the last 20 years and have failed miserably.
The Manufacturing Renaissance is underway; please use your voting power to make sure the right balance is met and the Renaissance is fully realized.