Modern-Glass-Building

Three Ways to Capitalize on the 'Shale Revolution'

Chemicals companies able to assess the changing energy landscape and respond with innovative technologies, processes and products will emerge as the undisputed global leaders.

The natural energy boom brought by new drilling and fracking technologies is quickly reshaping the energy market.

Promising energy independence, lower costs and new jobs, the development has prompted a huge surge of investment in U.S. chemical manufacturing.

Along with that investment, many chemical manufactures are quickly making big changes to their current operations to harness the full fracking potential.

Stefan Guertzgen, senior director of chemicals at SAP, has put together a list of three key strategies that could help these manufacturers achieve those goals.

1: Move Production Close to Supply -- "According to industry experts, approximately 60-70% of the costs of chemical production is in the feedstock or raw materials. Companies seeking a long-term competitive advantage can lower these costs by reducing the distance between the source and their manufacturing facility. It is this strategy that has chemical companies flocking to build plants in the United States."

2: Import Less Expensive Shale Gas -- "Another strategy for benefitting from natural gas availability is to import it to be used in facilities closer to the demand. In the current shale gas situation, this could mean importing feedstock for non-U.S. based companies, particularly those in EMEA, to serve regional or local demand. The obvious downside to this strategy is that transportation costs incurred to some extent compensate for the low feedstock costs.  However, the fact that companies like INEOS continue to import natural gas proves there is still an overall net gain in operating their assets and serving their markets based on shale gas feedstock."

3: Leverage Technology for Product and Process Innovation -- "Sometimes it is not possible to relocate or import shale gas. In those situations, companies need to turn inward to implement or develop innovative technologies that improve current feedstock or use existing resources in new ways.  As the saying goes, 'necessity is the mother of invention' and for companies without access to less expensive shale gas, innovation is critical to survival."

 


More on the 'shale revolution' on IndustryWeek.

IndustryWeek
is an NED companion site within Penton’s Manufacturing & Supply Chain Group.
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