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The shale advantage

Belgium is home to the second largest chemical cluster in the world after Houston, Texas. However, the shale revolution in the US has reshuffled the deck, with the US now holding the trump cards. Cheap and abundant gas is pulling new investments to the US, as recently evidenced by BASF’s announcement of a €1 billion investment along the Gulf of Mexico coast. 

As Tom Donohue, President of the US Chamber of Commerce, recently explained, over the last decade the US has gone from a position of ‘Where am I going to get that stuff?’ to ‘We have a lot of it’. One result of the growing domestic supply of energy is falling prices. In fact, gas prices in the US have fallen to a third of European levels.

This has lured many companies to invest in the US. Through February 2014, the chemical industry has been able to attract 148 new investment projects worth some $100 billion. By 2023, the American Chemistry Council projects 637,183 new jobs will be created thanks to increased activity in the chemical industry.

The attraction for chemical companies is two-fold: not only are their industrial processes energy intensive, but gas is also often an important raw material for their products. BASF, for example, will use gas in the production of propylene at its new US plant.

Marcel Claes, Chief Executive of AmCham Belgium, is currently travelling in the US with AmChams in Europe. In Washington, DC yesterday, the group was briefed by the US Chamber of Commerce’s Institute for 21st Century Energy on the exportation of US energy (coal, gas and oil). Not coincidentally, after Washington, the group will be going on to Texas, where they will see the impact of the shale revolution firsthand.

The shale gas revolution has transformed the chemical industry and redirected the investment streams to the US due to its significant cost advantage. Although shale gas might not be feasible in Belgium, the US success should spur Belgium to at least be open-minded about unconventional energy resources. With a nuclear phase-out planned for 2025, alternative resources could help guarantee Belgium’s security of supply. If nothing else, Belgium can look at the US as an example of how bold measures can turnaround a country’s competitiveness.