Shale Gas Opportunities and risks for shale gas extraction in the US
The shale gas boom in the USA heralds a paradigm shift in the country, and only those who react quickly will profit from it. Dr. Michael Thiemann, Chairman of the Executive Board at ThyssenKrupp Uhde, is mainly relying on process know-how for success.
PROCESS: Mr. Thiemann, all forecasts for the future indicate that the shale gas reserves that have been discovered in the USA will increase gas consumption, both as an energy source and as a feedstock for chemicals production, thus heralding a paradigm shift in the country. How does the major EPC contractor ThyssenKrupp Uhde need to prepare for this?
Thiemann: Shale gas exploration has indeed had a catalyst effect on the world market and has now pushed the price of gas in the USA to between two and three dollars per million BTU. This has of course resulted in a wave of activities, the first of which we are currently experiencing. At the moment, plants are being built in which shale gas can be used without further upgrading, e.g. for electricity production at power plants and in fertiliser plants. We are expecting the second wave in the next four to five years, based on the gas cracker capacities which are currently in the pipeline and which will supply olefins for the production of basic chemicals. The upgrading technologies needed for this are to a certain extent already available. This will, in turn, lead to the construction of plants for the production of polyethylene, propylene and other basic plastics. And I am sure that the gas-to-liquids route will again become lucrative for the US fuel industry.
PROCESS: What strategic approach do you intend to take in this area?
Thiemann: The fact is that in order to survive to the second phase you need to adopt the right approach in the first phase. We will only succeed in profiting from the shale gas boom if we take up this challenge. The important thing at this moment is therefore to be a leader in these developments, and at ThyssenKrupp Uhde we reckon we can be.
PROCESS: You have already received the first orders for fertiliser plants, and others are now at the evaluation stage — is this not an ideal springboard for ThyssenKrupp Uhde’s ammonia and urea business?
Thiemann: At the moment, large projects are being launched which aim to make America’s fertiliser industry independent of gas imports. A neck-and-neck race has broken out for these projects. In October we won the project in Iowa to build a new liquid fertiliser plant with a daily production capacity of 4300 tonnes for Orascom Construction Industries (OCI). This is one of the two biggest single-train UAN plants in the world. We are executing the engineering for six of a total of seven process plants and supplying the necessary equipment and machinery. The nitric acid, ammonium nitrate and UAN plants will be based on our proprietary processes. We have thus landed our first shale-gas-based contract and are optimistic about winning further orders.
PROCESS: Is this a chance to break the dominance of US plant contractors in their own country?
Thiemann: We will take advantage of the first wave to adapt to the new situation in the USA by setting up project management and erection capacities as well as procurement structures there. At the moment our project list contains thirty to forty projects which depend on shale gas. Our bid for the Iowa project was successful because of our technological strength, and we are convinced that we can come through again on the basis of this strength when future projects are awarded. Our clear focus on technology is thus paying off in the face of American competitors, who are not typical technology-oriented general contractors. Moreover, the fact that major German EPC contractors are active in North America also means opportunities for equipment suppliers, e.g. for high-capacity turbines, compressors and other special equipment.
PROCESS: Will fertiliser business in the Middle East suffer as a result of the North American projects?
Thiemann: The world population is growing, and with it the demand for fertilisers, particularly in Southeast Asia. I do not believe there will be a slump in the Middle East; investment in the Arabian countries will continue, but the capacities will no longer grow so quickly. We therefore want to consolidate our fertiliser business in the Middle East and also take on business in North America at the same time. In this way we will grow and reduce dependency on individual markets.