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Shale spark spreads beyond energy

Tuesday, April 09, 2013 - 03:04

April 9 - GE's near $3 billion bid for Lufkin Industries and plans for more deals just scratches the surface of the potential economic impact of the shale gas boom in the United States. Bobbi Rebell reports.

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The U.S. shale gas boom is sparking more than new sources of energy. General Electric, for example, offering nearly $3 billion for Lufkin Industries- a 38 percent premium. Lufkin makes pumps to extract oil and natural gas. And GE says it's still looking for more multi-billion dollar deals tied to natural gas development. That enthusiasm is no surprise given the incredible economic lift tied to the rise of shale. Douglas Blake, Senior Wealth Manager at Newbridge Securities: SOUNDBITE: DOUGLAS BLAKE, SENIOR WEALTH MANAGER, NEWBRIDGE SECURITIES (ENGLISH) SAYING: "You look at the areas where we have these shale formations you know they are these sleepy little towns that are now minting billions of dollars for their local economies and for the U.S. economy. It's also a boon to jobs. We are going to have to create the infrastructure for these new energy formations." The National Association of Manufacturers in the U.S. estimates the shale boom will add 1 million manufacturing jobs in the country by 2025. Charles Neivert, chemical sector analyst at Cowen Securities: SOUNDBITE: CHARLES NEIVERT, DIRECTOR OF CHEMICALS AND AGRICULTURAL RESEARCH, COWEN SECURITIES (ENGLISH) SAYING: "Many different manufacturing operations use chemicals in various ways. So they're getting a cheaper raw material for their own use. In addition, obviously, the shale gas produces a lot of natural gas which is heavily used in the utility functions and as a fuel in a lot of different manufacturing industries where costs have come down very sharply as well." REPORTER BRIDGE: BOBBI REBELL, REUTERS REPORTER (ENGLISH) SAYING: Companies like Boeing and General Electric have started to bring back home some of the jobs they had moved abroad - because of the availability of cheap shale gas. Billionaire investor Wilbur Ross sees the trend expanding further. SOUNDBITE: WILBUR ROSS, CHAIRMAN & CEO OF WL ROSS & CO. SAYING (ENGLISH): "Manufacturing still accounts for 12 percent of our economy. But indirectly it accounts for much more because those tend to be high paying jobs, and therefore has a bigger impact on consumer spending. Shale gas has been helping to revolutionize that, and it's also been bringing in a lot of foreign direct investment. BASF is building chemical plant here for the first time in years. Even European steel mills are starting to build facilities here to take advantage of the cheap gas. So there's a lot going on." But labor costs are still a factor. SOUNDBITE: CHARLES NEIVERT, DIRECTOR OF CHEMICALS AND AGRICULTURAL RESEARCH, COWEN SECURITIES (ENGLISH) SAYING: "In anything that's molded or has a heavy component of manufacturing without a lot of labor involved there's no doubt we can become much more competitive with Chinese products. Anything that starts to move down further away from the actual product, the chemical products, the plastics products, would find that we'll still have competitive issues not just with China but with anybody with lower labor costs. " Shale gas could become available in China-but it's several years away and most likely would not be as cheap as U.S. supplies anyway.

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Shale spark spreads beyond energy

Tuesday, April 09, 2013 - 03:04