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Shale gas the big one
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Royal Dutch Shell is planning an ethane plant in a once-decaying steel valley of Beaver County, near Pittsburg. Dow Chemical is shutting operations in Belgium, Holland, Spain, the UK, and Japan, but pouring money into a propylene venture in Texas where natural gas prices are a fraction of world levels and likely to remain so for the life-cycle of Dow's investments.

Some fifty new projects have been unveiled in the US petrochemical industry. A $30bn investment blitz in underway in ethelyne and fetilizer plants alone.

A study by the American Chemistry Council said the shale gas bonanza has reversed the fortunes of the chemical, plastics, aluminium, iron and steel, rubber, coated metals, and glass industries. "This was virtually unthinkable five years ago," said the body’s president, Cal Dooley.

This is happening just as other clusters of manufacturing - machinery, electrical products, transport equipment, furniture, etc - are "re-shoring" back from from China to the US. A 16pc annual rise in chines wages over the last decade has changed the game. PricewaterhouseCoopers calls it the "Homecoming".

The revival of the chemical industry is a spin-off from the greater drama of America’s energy rebound, though a very big one. As many readers will have seen, the US energy department said last week that the country will produce 11.4m barrels a day (b/d) of oil, biofuels, and liquid hydrocarbons next year, almost as much as Saudi Arabia.America looks poised to become the world’s biggest producer in 2014. It will approach the Holy Grail of "energy independence" before the end of the decade.

This is largely due to hydraulic fracturing - blasting rock with water jets - to extract shale gas and oil, though solar power and onshore wind are playing their part.

Europe is going in the opposite direction, drifting towards energy suicide. So is Japan as it shuts down its nuclear industry after the Fukushima disaster. China is more hard-headed, as it needs to be. The country is adding 20m cars a year. Chinese oil imports are rising by an extra 0.5m b/d annually.

As of last week, US natural gas prices were roughly one third of European levels. The German chemicals group BASF said it had become impossible to match the US on production costs.

Asia is facing an even greater handicap as Japan soaks up supply of liquefied natural gas (LNG) to offset the closure of its nuclear power stations. Prices on the Pacific rim are near $15 per million British thermal units (BTU), compared to $3 in the US.

The US cost of ethane - the raw material for polymers and much of what we use - has collapsed by 70pc since 2008. It is why Exxon and Westlake Chemical are building new ethane plants in America, while loss-making Mitsubishi is closing its unit in Japan, and Mitsui may follow soon. Credit Suisse said ethane production is barely viable in Japan, Korea or Taiwan.

The gas differential with Europe and Asia will narrow gradually over time but there is no genuine global market for gas. Prices are local, dictated by pipelines. In Europe’s case they are dictated by Vladimir Putin’s Gazprom. Germany imports 36pc of its gas from Russia. Dependency rises to 48pc for Poland, 60pc for Hungary, 98pc for Slovakia, and 100pc for the Baltics.

While LNG helps plug shortages, it requires shipping at minus 116 degrees and at great expense in molybdenum alloy hulls. It then needs an elaborate infrastructure at the docking port.

Shale has made the US self-sufficient in gas almost overnight. The new twist of course is shale oil. Output has jumped to 2m b/d from almost nothing eight years ago. The Bakken field in North Dakota is twice as big as the conventional Prudhoe Bay field in Alaska.

America produced 81pc of its total energy needs in the first six months of this year, the highest since 1991. Citigroup thinks US ouput of crude and eqivalents will top 15.6m b/d by 2020, adding up to 3.6m jobs through multiplier effects. North America as a whole will reach 27m b/d - with Canada’s oil sands and Mexico’s deepwater fields - making the region a "new Middle East".

The implications are momentous. America will no longer need a single drop of oil from the Islamic world. The strategic burden will fall on Europe, which is meekly disarming itself to meet Wolfgang Schauble's austerity targets. Russia and China will be pleased to help.

What is staggering is the near total failure of Europe’s leaders to face up to this new world order, or to prepare for their energy crunch ahead. They have spent the last decade wrangling over treaties that nobody wants, endlessly tinkering with institutional structures, and ultimately holding 22 summits to "save" EMU, largely oblivious to the bigger danger ahead.

Germany is to shut down its nuclear plants by 2022, reluctant to admit that this can be replaced only by coal - and even then with great difficulty. It is opting instead for the romantic quest of a politically-correct grid. The goal is to raise the share of renewables from 20pc to 35pc by 2020 at a cost of €200bn, and then to green supremacy by mid-decade for another €600bn.

Germany seems to think it can power Europe’s foremost industrial machine from off-shore wind in the Baltic, without the high-voltage wires running from North to South yet built or on track to be built. "It is a religion, not a policy," said one German official privately, warning that his country is already "very near blackouts". He fears an almighty national disaster.

"There is huge fear about the energy switch," said Volker Treier from the German Chambers of Industry. "We have no realistic plan to replace nuclear power. Electricity costs are already very high. Everybody is complaining about this."

The risk is that Germany will hit its aging crunch later this decade with no viable power system in place, having discovered that the contingent liabilities of EMU rescues are real liabilities - and bigger than German citizens were led to believe. You could scarcely devise a more certain way to ruin a nation. My sympathies to German friends watching this unfold with horror.

France has shale but has imposed a drilling moratorium It will shut down a nuclear plant for good measure to appease the Greens. Italy has banned nuclear power, yet has little else.

Britain has been sauntering slowly towards a debacle for nearly fifteen years. Eight coal plants are to close by 2015 as they burn up their EU carbon allowances. Much of the UK’s nuclear industry is on its last legs. No new plant has yet been commissioned.

What we have is a very big gamble on off-shore wind, a very long way from where most people live. It will supposedly supply 17pc of UK electricity by 2020, equal to all other off-shore wind projects in the world combined. Let us pray that it works.

As the years recede from the credit crash of 2008, it is becoming clearer that America suffered less damage than supposed. The Great Recession was certainly a shock. The debt-load is frightening, but the US can at least hope to outgrow that debt.

What is remarkable is that Euroland is not cutting its combined public and private sector debt any faster than the US - as a share of GDP - by asphyxiating its economy. It is doing so more slowly. That is the difference between growth and recession.

They look only at public debt in Euroland, fixated myopically on one variable, ignoring the lessons of balance sheet recessions. Such is policy architecture of Europe.

Four years on we can seen that the epicentre of destruction has in reality been right here in the Old World. We may look back and realize that the last decade - the Merkel decade, the EMU distraction decade, and in its way the Brown decade - was the turning point when Europe finally lost its global footing.

 
Petrol from Air
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A small company in the north of England has developed the “air capture” technology to create synthetic petrol using only air and electricity.

Experts tonight hailed the astonishing breakthrough as a potential “game-changer” in the battle against climate change and a saviour for the world’s energy crisis.

The technology, presented to a London engineering conference this week, removes carbon dioxide from the atmosphere.

The “petrol from air” technology involves taking sodium hydroxide and mixing it with carbon dioxide before "electrolysing" the sodium carbonate that it produces to form pure carbon dioxide.

Hydrogen is then produced by electrolysing water vapour captured with a dehumidifier.  

The company, Air Fuel Synthesis, then uses the carbon dioxide and hydrogen to produce methanol which in turn is passed through a gasoline fuel reactor, creating petrol.

Company officials say they had produced five litres of petrol in less than three months from a small refinery in Stockton-on-Tees, Teesside.

The fuel that is produced can be used in any regular petrol tank and, if renewable energy is used to provide the electricity it could become “completely carbon neutral”.

The £1.1m project, in development for the past two years, is being funded by a group of unnamed philanthropists who believe the technology could prove to be a lucrative way of creating renewable energy.

While the technology has the backing of Britain’s Institution of Mechanical Engineers, it has yet to capture the interest of major oil companies.

But company executives hope to build a large plant, which could produce more than a tonne of petrol every day, within two years and a refinery size operation within the next 15 years.

Tonight Institution of Mechanical Engineers (IMechE) officials admitted that while the described the technology as being “too good to be true but it is true”, it could prove to be a “game-changer” in the battle against climate change.

Stephen Tetlow, the IMechE chief executive, hailed the breakthrough as “truly groundbreaking”.

“It has the potential to become a great British success story, which opens up a crucial opportunity to reduce carbon emissions,” he said.

“It also has the potential to reduce our exposure to an increasingly volatile global energy market.

“The potential to provide a variety of sustainable fuels for today’s vehicles and infrastructure is especially exciting.”

Dr Tim Fox, the organisation's head of energy and environment, added: “Air capture technology ultimately has the potential to become a game-changer in our quest to avoid dangerous climate change.”

Peter Harrison, the company’s 58 year-old chief executive, told The Daily Telegraph that he was “excited” about the technology’s potential, which “uses renewable energy in a slightly different way”.

“People do find it unusual when I tell them what we are working on and realise what it means,” said Mr Harrison, a civil engineer from Darlington, Co Durham.

“It is an opportunity for a technology to make an impact on climate change and make an impact on the energy crisis facing this country and the world.

"It looks and smells like petrol but it is much cleaner and we don't have any nasty bits."

 
Air for energy
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Cars, homes and factories could be powered using the air we breathe in the future, according to engineers at a special summit.

British scientists developing the technology say normal air can be used to store energy by cooling it to 190C, turning it into a liquid.

When the liquid air is later warmed, it rapidly expands into a gas, creating high pressure that can drive the piston engine of a car, or generate electricity in a turbine.

Dr Tim Fox, of the Institution of Mechanical Engineers , which has organised the summit of experts, said: "We're coming out of the cave blinking on this one and we're only just getting an inkling of how great the energy storage benefits of liquid air could be."

One company, Highview Power Storage, has built a pilot plant next to a power station in Slough to prove the technology works.

At times of low demand for electricity, the plant uses the excess energy from the power station to suck air through refrigerator-style compressors turning it into a liquid, which it then stores in an insulated tank.

When consumer demand spikes, the energy is returned to the national grid. The tank, which stores 60 tonnes of liquid air, can power 6,000 homes for one hour.

The company's chief executive officer Gareth Brett told Sky News the technology is far cheaper than storing energy in batteries.

"The trouble with batteries is they are best suited to small applications like your laptop," he said.

"What we are talking about here is the national grid, which requires very large amounts of electricity to be stored.

"There are relatively few ways of doing that and we think with liquid air we have found one of the few technologies that is truly scalable to grid scale usage."

The technology could make wind turbines more viable, by storing excess production at high wind speeds, releasing it again in calm weather, he said.

Research by Imperial College suggests energy storage could reduce the number of power stations and national grid infrastructure needed, saving £10bn.

Engineering (Milan: ENG.MI - news) firm Ricardo is also developing a car engine fuelled by liquid air, based on a prototype built by inventor Peter Dearman.

Using a beer keg to store the liquid and copper pipes from a DIY store he generated enough power to drive his Vauxhall Nova.

"I've probably done 35mph. It probably would go faster but I haven't taken it out on the open road, so I've been limited on space," he said.

He said a liquid air car would overcome some of the problems with electric cars, which are expensive, use scarce materials in their batteries and are best suited to short distances.

"It's not the range of the electric car that is the problem, it's the recharging," he said.

"With liquid air you have the convenience of the petrol engine in that you can refill it quickly, simply by pouring it into the tank."

 
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