T

he United States' loss of chemicals and plastics manufacturers is turning out to be the world's gain.
   As the makers of chemicals and plastics turn out the lights at their once robust American factories, they are increasingly choosing the low-cost energy havens of Asia, the Middle East, Russia and even southern Africa.
   "Natural gas costs [US]$7 per one million BTU here in the U.S. and only 25 cents per million BTU in Qatar, and we don't see any serious relief on the near-term horizon," says Loren C. Scott, professor emeritus of economics at Louisiana State University and an internationally recognized expert on trends in chemicals and plastics manufacturing.
   "If you want to know where the real hot spots are right now for making plastics and chemicals, look to the Middle East and anywhere where the price of natural gas is low," Scott says. "Some of these companies are looking at Russia, which has the largest reserves of natural gas on the planet. National Geographic recently published a satellite image of the world taken at night. Along the bottom of the horn of Africa and the top of Russia were red streaks. These streaks were caused by the natural gas being flared off at night. In other words, they have so much natural gas that they can't even contain it all. It is remarkably cheap in these locations."
   Trinidad is another place where natural gas can be bought on the cheap – for about $1 per million BTU, says Scott, and that is helping this small Caribbean nation flourish.
   Scott says the movement away from the U.S. is especially evident along the Gulf Coast where, except for a few large projects like Shintech's $1-billion investment east of Baton Rouge, makers of plastics and chemicals are being forced out by shortages and high costs of natural gas.
   "Hurricanes Katrina and Rita last year took a lot of natural gas out of the system," adds Scott. "About 18 percent of the supply is still off line because of those two storms. When you take out 18 percent of what is produced in the Gulf of Mexico, that is a problem, and it adds to the pressures on the supply and price of natural gas."
   If the National Oceanic and Atmospheric Administration is correct, the 2006 hurricane season could be just as disruptive as 2005's. The agency is predicting 16 major storms this season. If just half of those occur in the Gulf, that equates to 35 to 40 days of lost supply of natural gas.
   Manufacturers caught a break, however, with the relatively mild winter that followed the tumultuous hurricane season of 2005. An unusually warm November and January spared companies from what would have been natural gas prices of $20 per million BTU. "We also would have run out of natural gas and would have triggered curtailment laws," says Scott. "We actually caught a lucky break in that the natural gas that we had in storage held up during the season."
   The net effect of high prices and supply shortages of gas is a radically changed landscape for manufacturing.
   "If you are a company that has to use natural gas, such as paper mills and lumber yards, you are being forced to build your own electricity generating supplies," says Scott. "These companies are starting to build facilities that enable them to take their leftover wood chips and sawdust and burn them to generate steam and electricity. They are also converting to coal-fired plants to produce energy."
   A good example is CLECO, the Louisiana electric utility that is spending $1 billion to build a coal-fired plant.