© 2024 WKNO FM
Play Live Radio
Next Up:
0:00 0:00
Available On Air Stations

German Chemical Giant BASF Benefits From Cheap U.S. Natural Gas


While in Brussels, the president's also expected to focus some of his attention on energy. It's likely to come up as he holds those summit meetings with EU leaders. There's a difference of opinion when it comes to shale gas, Europe is not as enthusiastic as the United States is. Much of Europe opposes or even outright bans the process known as fracking, which releases natural gas from shale deposits. Analysts say the failure to develop a shale gas industry is hurting Europe's competitiveness and many companies are moving their operations to the United States.

NPR's Jackie Northam traveled to Louisiana to visit one European company.


JACKIE NORTHAM, BYLINE: It's morning here in Geismar in central Louisiana, and construction workers have already been on the job for several hours.


NORTHAM: Cranes hoist heavy counterweight onto the back of a waiting truck. They're secured with chains. Behind the workers is a half built structure, a tall tangle of pipes and beams and towers. It looks something like the children's game, Mouse Trap. When finished, the plant will produce formic acid, which is used for leather tanning, de-icing airplanes among other things.

The plant is part of an expansion by the German chemical giant BASF, which owns a 30-acre patching hugging the Mississippi, but there's plenty of other construction stretching from Baton Rouge to Lake Charles, says Heath Lavatut(ph), the chief engineer at the BASF site.

HEATH LAVATUT: They got a new construction going on down the road (unintelligible) and Westgate been doing a lot of - a lot of construction going on right now in this area, though, and in this plant, actually. And there's going to a lot from, I guess, until 2020, I would think.

NORTHAM: What's driving the construction here and in many other parts of the U.S. is an abundance of cheap natural gas. Tom Yura, senior vice president of the Geismar site, says BASF itself began aggressively expanding in the U.S. in 2009. That's when the shale gas industry took off, thanks, in large part, to hydraulic fracturing or fracking.

TOM YURA: What it's done is it's accelerated recently the investments that we've had here. It's also made us globally more competitive from a manufacturing chemical standpoint.

NORTHAM: BASF now has more than 100 production sites across the U.S. Analysts say its invested $6 billion in U.S. projects since 2009. Many other European nations are also flocking to the U.S. in search of energy cost savings. Natural gas here is one-third its cost in Europe, says Will Pearson, director of Global Energy and Natural Resources at the Eurasia Group. He says there are more than 100 projects planned across the U.S. for companies that use natural gas as both a raw material and for power.

WILL PEARSON: And there's perhaps about 70 projects in the petrochemicals industry, but it's really across the industrial sector, the energy intensive industrial sector. It's glass and plastics, fertilizer, steel.

NORTHAM: It's also the auto and airline industries. John Larson, a vice president with IHS, a global energy research company, says one of their recent studies found an estimated $100 billion will be pumped into the U.S. economy by 2020 as a result of the low energy prices. That may be good news for the U.S. economy, but it is a cause for concern in Europe.

Larson says the shifting of European companies to the U.S. is having a dramatic impact on the continent's competitive edge.

JOHN LARSON: I would characterize it as a slow deinvestment in Europe as companies overseas look to seize this opportunity and shift more of their investment dollars to U.S. markets. And, in fact, in Germany, for example, over the past six years, there's been a de-investment of about 52 billion euros.

NORTHAM: That's more than $70 billion. Larson says given that, European leaders may be more open to reconsidering fracking. Larson says the dialogue in Europe seems to have shifted from where it was even six months ago.

LARSON: I think a lot of that was a combination of understanding the competitiveness lost and the challenges they face because of these energy differentials, but I think also what's happened in the Ukraine and the risk of diversity of supply and security of supply has helped to crystallize some of the thought processes. So I do think that this has served as sort of clarifying moment, if you will.

NORTHAM: Still, Larson says many of the European leaders will face a hard time selling it to a public which widely opposes fracking. Jackie Northam, NPR News. Transcript provided by NPR, Copyright NPR.

Jackie Northam is NPR's International Affairs Correspondent. She is a veteran journalist who has spent three decades reporting on conflict, geopolitics, and life across the globe - from the mountains of Afghanistan and the desert sands of Saudi Arabia, to the gritty prison camp at Guantanamo Bay and the pristine beauty of the Arctic.