European industry flocks to U.S. to take advantage of cheaper gas (Washington Post)

April 3, 2013

Washington Post: European industry flocks to U.S. to take advantage of cheaper gas

By Michael Birnbaum, Published: April 1, 2013

LUDWIGSHAFEN, Germany — The sprawling chemical plant in this city along the Rhine River has been a jewel of Germany’s manufacturing-led economy for more than a century. But the plunging price of natural gas in the United States has European companies setting sail across the Atlantic to stay competitive.

German chemicals giant BASF, which operates the plant here, has announced plans for wide-ranging expansion in the United States, where natural gas prices have fallen to a quarter of those in Europe, largely because of American innovations in unlocking shale gas.

Among those most affected are energy-intensive industries such as steel and chemicals, because they use natural gas as a raw material and power source. With Europe lagging in energy production, manufacturers on the continent warn that a chain reaction could shift more and more investment to U.S. shores.

“It’s become clear, with the drop in gas and electricity prices in the United States, that we are, at the moment, at a significant disadvantage with our competitors,” said Gordon Moffat, director general of Eurofer, the main lobbying group for European steel manufacturers.

As new dollars pour into the United States, the outflow from Europe is costing jobs and weighing on decisions about ambitious and expensive green-friendly policies that critics say are contributing to the energy-price gap.

Here in Ludwigshafen, many people view the United States as the land of the future. Since 2009, BASF has channeled more than $5.7 billion into new investments in North America, including a formic acid plant under construction in Louisiana, where the company will manufacture a chemical used to de-ice runways, tan leather and preserve animal feed.

Top BASF officials say that unless Europe allows a more aggressive approach to energy production, including broader use of hydraulic fracturing, or fracking, even more manufacturing will move to the United States. Fracking involves injecting high-pressure blasts of water and chemicals into a well to break apart rock and unlock the gas inside.

“It’s a very slow process, but it’s a continuous one,” said Harald Schwager, the head of BASF’s European operations, referring to the manufacturing outflow. “Once a customer of ours decides to build a new factory in the U.S., then this customer will request from us to be close by with our production. And so, over time, you see a self-accelerating process, which will move production into the U.S.”

The company’s Ludwigshafen complex, a warren of spaghetti-twisting pipes and chimneys that makes chemicals for a variety of products such as diapers, foam and car parts, is expanding slightly. Few of the 38,000 workers at the plant, spread over a site eight times as large as the Mall in Washington, see any immediate danger to their jobs. But nervous union officials view the expansion in the United States as a threat.

“Normally these would be good times right now. But we look into the future, and the prognosis is not so positive,” said Robert Oswald, the head of BASF’s union. “If the energy prices remain so much lower in the United States than here, of course that will endanger jobs.”...

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