subscribe to ENR magazine subscribe
contact us
careers industry jobs
events events
Dodge Data & Analytics
ENR Logo
Web access will be provided
as part of your subscription.

Cheap Natural Gas Boosts U.S. Power Production, Manufacturing

Text size: A A
[ Page 1 of 3 ]
Duke Energy's Dan River Combined-Cycle Station in Eden, N.C., is leading the utility's shift to natural gas from coal, a growing trend.
----- Advertising -----

Cheap natural gas is lighting a fire under manufacturing, a sector of the U.S. economy given up for dead as the Rust Belt spread and the so-called service economy became the nation's fallback. Taking advantage of low-cost feedstock, a petrochemical industry boom on the U.S. Gulf Coast is expanding to areas near the great gas-shale beds.

Cheap gas is eating into coal's share of the power industry's fuel market. It is even changing the U.S. from an importer to an exporter of liquefied natural gas as recently constructed LNG terminals are being converted into production plants.

When low-cost products begin rolling out of the new petrochemical plants, they are expected to spark investment in U.S. manufacturing capacity to turn the chemical products into consumer goods.

"The shale-gas play is a fundamental market shift," Fluor Corp. CEO David Seaton told investors at a Credit Suisse briefing in New York City on June 7. "We're in the front end of a $40-billion investment in gas flow, heavily weighted in petrochemicals and gas-to-liquids. It is the beginning of an interesting investment cycle."

Others also find the geographic shift compelling. Philip Asherman, CEO of Houston-based engineer-builder CB&I Co., says that 75% of the firm's new orders in the first quarter of 2012 were in the U.S. "It's a rebalancing of the market," he told the investors. "We see capital flows strong in the next 36 months. There will be a lot of preliminary engineering."

The industry's second coming won't happen overnight, analysts warn. The price of natural gas has fallen to unsustainable levels, hitting a 10-year low in April, and production is being reduced as the price falls below the producers' break-even point of about $3 per million Btu. On June 12, the U.S. Energy Information Administration's Short-Term Energy Outlook forecast an average natural-gas spot price of $2.55 per million Btu, 10¢ over the previous month's forecast. In 2013, EIA projects the spot price will climb to $3.23.

Long-term forecasts are for prices in the $5 to $7 range for the next decade, raising hope for a stability that will encourage investment. "We could see the price come back earlier than we thought," says Bill Utt, CEO of Houston-based KBR. But prices will remain below $6, he adds.

Powering Up

The electric-power sector has been leading the shift to gas for years. Since 1995, 80% of new capacity has been gas-fired units, EIA says.

Fuel switching also is adding to market share for gas. In August 2008, powerplants were swapping coal for gas for almost the first time in U.S. history. The trend has continued monthly since then. For the past three years, switching has grown exponentially, doubling each year, says the Natural Gas Supply Association, Washington, D.C.


[ Page 1 of 3 ]
----- Advertising -----
  Blogs: ENR Staff   Blogs: Other Voices  
Critical Path: ENR's editors and bloggers deliver their insights, opinions, cool-headed analysis and hot-headed rantings
Project Leads/Pulse

Gives readers a glimpse of who is planning and constructing some of the largest projects throughout the U.S. Much information for pulse is derived from McGraw-Hill Construction Dodge.

For more information on a project in Pulse that has a DR#, or for general information on Dodge products and services, please visit our Website at

Information is provided on construction projects in following stages in each issue of ENR: Planning, Contracts/Bids/Proposals and Bid/Proposal Dates.

View all Project Leads/Pulse »

 Reader Comments:

Sign in to Comment

To write a comment about this story, please sign in. If this is your first time commenting on this site, you will be required to fill out a brief registration form. Your public username will be the beginning of the email address that you enter into the form (everything before the @ symbol). Other than that, none of the information that you enter will be publically displayed.

We welcome comments from all points of view. Off-topic or abusive comments, however, will be removed at the editors’ discretion.