Running On Empty?

As the energy challenge facing manufacturers escalates, the chemical industry is feeling a major pinch.

As the energy challenge facing manufacturers escalates, the chemical industry is feeling a major pinch. While the ramifications of the high price of fuel and natural gas are frightening for this energy-intensive sector of the manufacturing industry — chemical plants are moving overseas and hundreds of thousands of chemical industry jobs have been lost — chemical engineers are somewhat fortunate in that they hold the key to unlock the door to their industry’s salvation.

Overcoming the problem requires the development of new sources of energy that mandate changes in chemical processing. Fortunately, chemical engineers possess the knowledge and expertise that can mastermind the solutions that will help their industry and the world beat the odds. Chemical industry organizations are also large and powerful enough to sway the government to initiate policies that can help provide relief.

Dire Straights
While the high cost of energy, especially natural gas, in the U.S. affects every American in the form of record-breaking heating bills and fast-climbing price tags on just about every manufactured product, it is especially troubling for the chemical industry. According to Jack Gerard, president and CEO of the American Chemistry Council (ACC), the chemical industry uses 2.5 trillion cubic feet of natural gas each year. This is more than 10 percent of the nation’s total consumption, making the chemical industry the largest industrial user of natural gas. While some of this is used to fuel and heat chemical facilities, a large percentage is used as a raw material.

“Natural gas is to chemical manufacturing as flour is to baking,” said Gerard during testimony before the House of Representatives’ Subcommittee on Energy & Mineral Resources during a legislative hearing on the Outer Continental Shelf Natural Gas Relief Act last November.

“Unlike other industrial users, which consume natural gas for fuel and power, we also use it as a starting block for our products and processes,” says ACC Chief Economist Kevin Swift. “In some cases, like ethanol processing, we use it directly. In other cases, we take natural gas, break it down and, through processing, it ends up in products like shampoo and telecommunications equipment. Ninety-six percent of manufactured goods contain chemistry, and chemistry contains natural gas. Therefore, almost everything you touch and see is made from natural gas.”

Last year, the nation’s natural gas bill topped $200 billion. The chemical industry’s share was more than $20 billion, according to ACC estimates. By comparison, in 1999 when gas sold for $2 to $3 per million BTUs, the nation spent just over $50 billion and the chemical industry’s bill was $5 billion. Obviously, this steep increase isn’t good for the industry. The extra money spent on natural gas is money that hasn’t been invested in research, building new plants or creating new jobs.

According to John Chen, president of the American Institute of Chemical Engineers (AIChE), the number of new petrochemical plants being built in the U.S. is drastically slipping. “The plants are moving overseas,” he says. “In 2003, the Middle East accounted for 42 percent of the new petrochemical plants, the Asia-Pacific region about 28 percent, Europe about 28 percent and the U.S., only 2 percent. That’s scary to me,” he says. “But who can blame them, they are chasing the natural gas feedstock.” In March, the U.S. price of natural gas was near $7 per million BTUs. In Saudi Arabia, it was 75 cents, says Swift.

Chen isn’t the only one to notice the loss of U.S. chemical plants. A May 2005 Business Week article, titled “No Longer the Lab of the World: U.S. chemical plants are closing in droves as production heads abroad,” states that “of the 120 chemical plants being built around the world with price tags of $1 billion or more, just one — a 1,725-acre polyvinyl chloride plant in Plaquemine, LA — is in the U.S.”

To bring the point home, Gerard tells the story of a $4 billion Dow Chemical plant being built in Oman. “That plant will employ 1,000 people in high-paying R&D, engineering and operations jobs. Until three years ago, that new plant and those 1,000 jobs were going to be built in Freeport, TX. Andrew Liveris, president and CEO of Dow Chemical, said the high cost of natural gas here — now 12 times higher than it costs on the Arabian Peninsula — is why Dow moved the project.”

Moves like this one have resulted in more than 100,000 well-paying jobs in the chemical industry disappearing, due in large part to a hidden “energy tax,” says Swift. These ramifications have hit the plastics sector especially hard, says William Carteaux, president and CEO of the Society of the Plastics Industry (SPI). “In addition to losing facilities and jobs, the plastics industry has lost over $14.5 billion in business between 2000 and 2005 due to the high cost of natural gas, which we also use as a feedstock,” he says. “In eight to 10 years we won’t have any industry left.”

Shining Armor
While no one denies the harsh impact the rising cost of energy has had on the industry, some feel chemical engineers will become their own knights in shining armor. “No other social or technical challenge will impact the chemical enterprise, chemical professional and the well being of nations as much as the energy challenge we currently face. However, no group is as well suited to contribute possible solutions to the challenge of the energy supply, production, use and conservation as chemical engineers,” says Chen.

“While it may seem philosophical or boastful, our enhanced technical background sets us apart from others and when you throw in the fact that our livelihood depends on energy, you have a group of people that are motivated to use their knowledge to work through this situation.”

While it can’t hurt to use that knowledge to continue refining processes and making energy-conscious changes to plant infrastructure — the U.S. chemical industry reduced its energy consumption by 6 percent in 2004 and improved its energy efficiency by 46 percent since 1974, says the ACC — it’s not enough. Those chemical engineering degrees must be put to good use developing alternative sources of energy.

One of the most viable solutions to generating energy to fuel the plant’s processes is co-generation, according to Chen. “A chemical plant needs energy and feedstock. Energy is most often used in two forms — electricity to drive motors and heat to heat the reactors, columns and such,” he explains. “When a utility makes electricity by burning coal, natural gas or oil, about two-thirds of that energy is lost. It is thrown away because  it is heat, and power stations  can’t use the heat. But if the  electricity was generated by the chemical plant, they could use the electricity they generate to power the plant and use the heat for their other processes.”

Waste-to-energy is a solution supported by the SPI. “If you look at one plastic grocery bag, there’s enough potential power in it to light a 60-watt light bulb for 10 minutes,” says Carteaux.

More in Energy