U.S. shale natural gas resources have the potential to ignite a domestic manufacturing “renaissance” that could create one million jobs and billions in energy cost savings, according to a new report by industry consultant PwC US.

PwC is forecasting that by 2025 an estimated $1.6 billion in energy cost savings could be achieved by combining recent gas consumption levels with potential gas prices under its “high” shale recovery scenarios. Under its high scenario manufacturing employment could increase by almost one million by 2025. To achieve the increased levels of employment, manufacturers have to help manage the environmental, regulatory and tax concerns created, the report noted.

PwC’s Bob McCutcheon, U.S. Industrial Products leader, and Jay Timmons, CEO of the National Association of Manufacturers (NAM), explained the benefits of the domestic shale gas boom to U.S. manufacturing during a press conference Wednesday in Washington, DC. PwC collaborated with NAM to produce the report.

“Shale gas is an issue that has really come to the attention of American manufacturers, American businesses, and Americans overall because of its potential to revive the economy and sustain long-term economic growth,” said Timmons. “Today we are poised for a renaissance in manufacturing as long as we get the policies right and the factors holding us back are worked out.”

Several studies have looked at the benefits of shale gas and its ability to create jobs and revenues in specific sectors and in specific regions. Earlier this year a study commissioned by the Independent Petroleum Association of America found that in 2010 onshore producers nationwide supported almost 400,000 direct workers and generated $263 billion in gross economic output (see Shale Daily, April 12).

However, PwC did not focus on a specific region or a specific job sector. Instead it looked at the benefits of new gas supplies nationwide across the manufacturing spectrum.

For instance, it costs 20% more to manufacture in the United States than in the rest of the world, Timmons noted. “We have several cost drivers” in the United States that are regulations, taxes, tort costs and employee benefits. The cost of labor wasn’t included in the report; PwC focused on issues that are “driven by policy and established in Washington…”

Higher costs have “been a drag on our ability to compete in the worldwide market,” but shale gas has given the United States “an advantage in energy costs…which would be enormous for job creation coast to coast…It’s an absolute game changer for the U.S. economy,” said the NAM chief.

In addition to creating jobs, the abundance of shale gas results in overall lower costs in energy. Timmons said it’s an important component because “manufacturers consume one-third of the nation’s energy output. It’s an immense cost driver to the cost of doing business in this country.”

An “underappreciated part of the shale gas story is the substantial cost benefits that could become available to manufacturers based upon estimates of future natural gas prices as more shale gas is recovered,” said McCutcheon.

“In fact, the number of U.S. chemicals, metals and industrial manufacturing companies that disclosed shale gas potential and its impact so far in 2011 easily surpassed that of the last three years combined, indicating this is of growing importance in the outlook of U.S. manufacturers. The significant uptick in shale gas commentary among the manufacturing community reflects the positive influence that shale gas is having from investment, operational and demand standpoints.”

Because of the stable supplies of shale gas, manufacturing industries are able to lower feedstock and energy costs, and are looking to shale gas as a source of growth for their products. For example, companies that sell goods such as metal tubular products, drilling and power generation equipment should experience a near-term growth in sales as domestic natural gas production rates move higher, according to PwC.

Industries likely to primarily benefit from the increased use of low-cost U.S. gas supplies are chemicals, metals and industrial manufacturing, said Timmons.

“Manufacturers and communities throughout the country are beginning to see and recognize the real economic benefits of shale gas,” he said. “Shale gas development is a bright spot in our economy and it has the potential to boost manufacturing employment by one million jobs, which are badly needed.”

Shale gas already has contributed to more manufacturing investments in the United States, particularly with chemical companies seeking cost advantages by using cheaper ethane, a natural gas liquid derived from shale gas, differentiating themselves from foreign competitors that rely more on oil-based naphtha.

For example, on Wednesday Chevron Phillips Chemical Co. LP said it would construct a “world-scale” ethane cracker and ethylene derivatives facilities in the Texas Gulf Coast region near Baytown. CEO Peter L. Cella, who made the announcement at a conference in Dubai, United Arab Emirates, credited abundant U.S. gas shale resources in helping to make the final decision. No financial details were disclosed.

Agreements have been executed with Shaw Energy & Chemicals to design a 1.5 million metric tons/year (3.3 billion pounds/year) ethane cracker at the chemical company’s existing Cedar Bayou facility in Baytown. Two polyethylene facilities, each with an annual capacity of 500,000 metric tons (1.1 billion pounds), are to be built either at the Cedar Bayou facility or at a site nearby in Old Ocean. A final site selection decision for these units is anticipated early next year.

Manufacturers outside the chemical industry also have announced expansion plans because of incremental energy resources and plan on making investments in the United States based upon the opportunity to sell equipment for shale gas plays, according to PwC.

The relatively inexpensive and stable long-term source of natural gas is helping manufacturing companies expand and open more facilities in the country, which presents an opportunity to create more jobs in the industry, Timmons noted.

“The expectation of the new shale gas resource providing a significant long-term boost to move the U.S. manufacturing employment needle shines a light across the nation amid the current labor market woes,” said McCutcheon.

However, Timmons and McCutcheon said there are environmental and regulatory concerns that have to be addressed. The rapid decline in production rates for shale as compared to conventional gas, which requires drilling more new wells to offset decline in existing wells, is one concern. Also, infrastructure is needed in some regions that haven’t previously produced significant amounts of gas. Environmental concerns about hydraulic fracturing also have to be considered.

“The economic benefits to U.S. manufacturers can’t happen if shale gas is not extracted in a profitable and safe manner,” said McCutcheon. “To achieve these significant outcomes, manufacturing companies must effectively communicate the value that shale gas can create for U.S. workers and communities.”