INTERVIEW: Dow exec critiques US energy policy

20 April 2007 09:02  [Source: ICIS news]

By Matt Kovac

SINGAPORE (ICIS news)--A senior executive at Dow Chemicals has hit out at the US’ inability to create a uniform energy policy, which has forced chemical companies to move overseas.

The high cost of natural gas as a feedstock for the chemical industry was contributing to plants becoming obsolete, said David Graham, vice president of environment, health and safety at Dow Chemical, on Friday.

“When equipment becomes obsolete then you have to pretty quickly find joint ventures around the world,” he said on the sidelines of a United Nations sponsored environmental summit in Singapore.

“This comes at the expense of the US, which does not have a uniform policy that is complementary and supportive of the energy industry,” he added.

Research by bank HSBC Saudi Arabia showed that US Henry Hub gas prices averaged $6.73/m Btu in 2006 and around $7.20/m Btu in the first quarter of 2007, 10 times more costly than in parts of the Middle East.

Saudi Basic Industries Corp (SABIC), for example, pays 75 cents/m Btu for gas in Saudi Arabia.

Democrats in Washington have indicated they will act on a significant energy bill this year, which would appease the chemical industry by allowing more offshore drilling for natural gas.

The bill is likely to encounter some opposition, particularly to drilling off the coast of Florida and will not solve the short-term pricing problems US companies face.

However, the bill may not be enough to solve ageing crackers, which are already close to the limit of their normal operating life.

The HSBC research said the average age of ethylene plants in the US is 28 years, leading to a hollowing effect of crackers.

“The decision to close a plant is now a lot easier than it was before, and we already see signals that operators of marginal capacity are looking to exit,” the report said.

Dow recently signed a deal with Libya’s National Oil Corporation (NOC) to build an ethane cracker, polyethylene and polypropylene (PP) plants, as well as upgrade existing facilities.

“We have the same standards wherever we are in the world and that’s why we are the preferred joint venture partner with governments,” said Graham.

By: Matt Kovac
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