The Next Energy Crisis?

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For some companies, the run-up in fuel prices is one more reason to ship jobs offshore. In the U.S. chemical industry, where 100,000 jobs have vanished since 2000, companies are building plants overseas, where natural gas goes for a small fraction of the price it commands in the U.S. Dow Chemical is constructing a $4 billion petrochemical plant in Oman, and CEO Andrew Liveris says the plant would have been built in Freeport, Texas, if not for the price difference. At PPG Industries in Pittsburgh, Pa., CEO Charles Bunch says he may have to close two North Carolina fiber-glass plants. "We've lost a lot of jobs to China because of the labor-cost difference," he says. "Now we're starting to lose jobs in energy-intensive sectors."

WHY DON'T GAS COMPANIES DRILL MORE WELLS? Oil and gas companies are flush with profits, so they could afford it. Exxon Mobil alone earned nearly $10 billion in the third quarter, a record for any U.S. firm. But companies seem more inclined to buy one another's assets and invest in proven reserves than go hunting for new sources. Conoco Phillips recently bid $35.6 billion for Burlington Resources, one of the world's largest natural-gas producers. In the contiguous 48 states, easily accessible fields are running full tilt. "We've had great success finding new reserves, but these are unconventional sources--low-permeability gas sands, shale gas, coal-bed methane," says Peter Dea, CEO of Western Gas Resources, a Denver-based gas producer. Longer term, more supplies are on the way. The U.S. Interior Department last week opened for exploration 389,000 acres of Alaskan tundra and shoreline, which officials estimate may contain 3.5 trillion cu. ft. of natural gas. Yet that's a pittance compared with the 22.3 trillion cu. ft. that the U.S. consumed in 2004. And two projects to transport gas from Alaska's North Slope and Canadian territories are in the works. One proposal entails building a $20 billion pipeline to Chicago, but that would take 10 years to complete.

WHAT ABOUT IMPORTING MORE LIQUEFIED NATURAL GAS? Energy companies would love to ramp up the trade in LNG, and European countries grew keenly interested after Russia and Ukraine got into a nasty spat over gas supplies a few weeks ago, roiling world gas markets. But there are tall hurdles. The U.S. has just five LNG receiving terminals, and while regulators in the U.S., Canada and Mexico have approved 15 more, the projects are hardly assured. Australian firm BHP Billiton, for one, wants to construct an offshore regasification plant the size of three football fields off the coast of Oxnard, Calif., but opposition is mounting. Activists raise concerns about pollution and potential harm to wildlife from such a large industrial operation. A spokeswoman for BHP says the LNG industry has never had a major spill (although an explosion occurred at an LNG production plant in Algeria in 2004).