It has often been said that the real estate, job and stock markets naturally correct themselves. Natural gas and natural gas liquid (NGL) markets may not fit in the same boat—after all, it’s hard to call the construction of a pipeline or processing plant a naturally occurring phenomenon—but the principle is largely the same. More and more demand for cheap gas and liquids has been more or less naturally occurring.

At Hart Energy’s recent Marcellus-Utica Midstream (MUM) Conference in Pittsburgh, several executives from diverse, end-use industries said they are committing to large capex projects to take advantage of the North American shale gale. (See January 2014 Midstream Business cover story, “The Alchemy of Natural Gas.”)

PotashCorp, the largest fertilizer company in the world, decided in 2010 to expand its U.S. ammonia capacity in response to domestically produced gas helping to create one of the most economic markets in the world. According to Audrea Hill, the company’s senior director of raw materials and hedging, in addition to competitive prices, U.S. gas has a favorable spread and a freight advantage that allows it to compete with the strongest global markets. Other transportation needs are being met through the current wave of pipeline construction that is ensuring supplies are routed to the correct areas.

The additional ammonia capacity will cause the largest year-on-year gas demand increase from the fertilizer industry in 2016. She noted that this is the third wave of demand, following the second wave last year projected from the power sector in 2015. To build sufficient supplies, prices must reward producers, Hill said.

Several other industrial end users have found unique approaches to securing supplies necessary to maintain the recent economic advantages of domestic shale gas. Nucor Steel’s general manager, resource development, Brad True, said the company acquired an interest in Encana to continue manufacturing direct reduced iron (DRI). This high-purity metallic iron feedstock is produced from natural gas by reducing and carburizing iron ore pellets. It helped the
company maintain a cost advantage when its competitors began to use scrap to make steel, which drove the cost of scrap up.

“DRI has consistent quality and lowresidual content and is more environmentally friendly,” he said.

The company is investing $750 million to build the largest DRI plant in the world, and the only one in the U.S., in Louisiana, but the success of this project was dependent on a long-term supply of cheap gas. Nucor acquired a 50% interest in each well that Encana drills in western Colorado. As of December 2013, this was approximately 270 wells.

“Gas produced from these wells offsets our exposure to the uncertain future costs of gas used in our operations,” True said.

U.S. shale plays continue to attract foreign investors, but one of the more intriguing of these foreign investments has come from Dyno Nobel, an industrial explosives manufacturer owned by Incitec Pivot Ltd. of Australia. The company recently announced plans to build an $850 million ammonia plant in Louisiana despite Australia supposedly being awash in its own gas supplies.

Interestingly, Australia has built several liquefied natural gas (LNG) export terminals that have designated so much of the
country’s gas supplies that the domestic market is now suffering dramatically, according to Tim Lawrence, manager, gas, energy and utilities at Incitec Pivot.

“The anticipated LNG consolidation did not occur and Australia failed to properly monitor our supplies, and it has hada largely negative impact on domestic markets,” he said. The new LNG trains will result in export demand increasing three
times by 2017. This resulted in price spikes and drove producers into high-cost recovery projects and reserves to meet demand.

As hard as it may be to believe, Australian gas prices are expected to increase by 120% from their historic price levels
by 2020.

While the U.S. has more reserves and cheaper prices combined with an unprecedented infrastructure network, Lawrence said Australia could be a cautionary tale for unchecked LNG exports.

“Unchecked LNG exports will cause domestic gas prices to spike, harming consumers, manufacturers and adversely impacting the economy,” he said, citing a recent report from Purdue University that found that the GDP will decline and result in higher electric bills for Americans based on both the high and low scenarios for LNG exports.

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