22 March 2013 13:42 [Source: ICB]
Just like its peers in North America, Huntsman has benefited from the advent of shale gas, giving it access to some of the cheapest feedstock in the world. It was less than 10 years ago that Huntsman and other North American producers were shutting down plants - because the region had some of the most expensive natural gas in the world. "Nobody seems to be talking about that," says the company's CEO, Peter Huntsman.
But Huntsman warns that bad policy could cause North American producers to lose their advantage in low-cost energy and feedstock. Specifically, the US may approve more export terminals for liquefied natural gas (LNG).
For energy producers, the potential profits are enormous. US natural gas prices are below $4/MMBtu. They are more than twice that amount in much of the world. However, opening the US gas market to exports could also open it to international energy prices, Huntsman warns. "If you look at international energy prices, they are set by the price of oil. As you look at who controls the price of oil, it is OPEC," says Huntsman. "Do we want that to be the marker for our natural gas?"
He adds: "Do we want to keep this advantage in North America or do we want to take market-based prices in North America today and surrender those to prices of energy that are set by a cartel?"
The North American market, meanwhile, is adjusting to low gas prices without energy producers going under. Huntsman says the region's natural-gas demand should rise as power plants switch from coal to natural gas. And the nation's petrochemical industry is undergoing a renaissance, with companies announcing ethylene, isobutylene and propylene projects
"I don't think there has ever been a time when the US has had such an advantage over so much of the rest of the world when it comes to petrochemical production," says Huntsman. "This certainly is as large a game changer as I've seen in the last 30 years."
SWITCH TO INVESTMENT
In fact, what is happening in North America is comparable with the build-up in capacity in the Middle East and China during the last decade, Huntsman believes, especially when you consider the dismal health of the region's petrochemical industry five years ago.
"This industry was shutting down billions of dollars worth of investment in North America, and here we are five years later investing billions of dollars," he says. "The Middle East and China have always been gradually growing and then growing at a faster rate. In neither of those cases have you seen such massive cyclicality, where literally billions of pounds of product have been shut down and then subsequently reversed within a matter of two to three years."
Looking ahead, where North America's industry goes will depend, to a large part on how smartly the region plays its energy options, Huntsman says. "If we look at our raw material sources as an opportunity, there is no doubt that the US would be a preferred location for not just petrochemical but for energy-intensive manufacturing for the next decade.
"As you look at aluminium, steel, chemicals and automotive components and aerospace - all of these areas really have a unique opportunity to expand in the world's largest economic market and to do so in a very competitive manner because of this abundance of raw material."
Huntsman has experienced both extremes of his industry. "Four years ago, out of our growth capital as a company, virtually none of that was in North America. We were spending more money shutting down assets in North America than we were in building or expanding assets in North America," he says.
"Think about that. That was just five years ago. And today, well over half of our expansion capital globally is in North America."
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