Executive confidence still strong

22 March 2013 15:19  [Source: ICB]

ICIS talks to eight industry leaders, giving a fascinating insight not only into the current thinking and the investments born of renewed optimism, but also the concerns that still nag in the background

Senior US petrochemical executives are in bullish mood - and no wonder, given the shale gas phenomenon that has transformed the sector over the past five years.

There can be no doubt that the petrochemical sector is embarking on a manufacturing renaissance, driven by access to low-cost energy and feedstocks as a result of shale gas production. This is reversing many years of low investment in the US, cutbacks and closures.

As Peter Huntsman, puts it: "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. This certainly is as large a game changer as I've seen in the last 30 years.

"Four years ago, out of our growth capital virtually none was in North America. We were spending more money shutting down assets in North America than we were in building or expanding assets [here]," 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."

But the rapid pace of expansion brings its own problems to exercise executive minds. Infrastructure is needed to get the oil and gas to the petrochemical industry, based largely in the US Gulf, and skilled engineers and craftsmen will be needed, although they are at present in short supply, as well as in the wrong place.

As Peter Cella of Chevron Phillips Chemical notes, the biggest challenge the petrochemical industry is facing is ensuring it has adequate workers and resources to pursue these projects successfully.

"We're opportunity long and people resource short," Cella says.

"We're looking for more diverse and experienced hires," he adds. "These are jobs that require some level of technical competency. Most are going to be experienced people already working someplace else."

There is also widespread concern and debate amongst chemical executives over the export of shale gas from the US and whether this should be allowed or not. Energy producers argue they need to export to support prices; chemical producers do not want to see their cost advantage diminished and feedstocks used by overseas competitors.

Stephen Pryor of ExxonMobil Chemical argues that "government interference in the market is tantamount to introducing price controls on natural gas. Any time we have allowed government to substitute its judgment for that of the market, we get in trouble."

And Dennis Seith of INEOS notes: "It's hard to set limits on exporting one product when you're arguing for open exports of others [such as crude oil]."

But others are not so sure. Dow Chemical's James Fitterling says: "We need to be prudent [about exports]." He argues that keeping much of the newly discovered natural gas in the country, both for feedstocks and energy uses, would help spur a renaissance in US manufacturing. "Five million jobs can be created," he says.

The following pages also include interviews with Beate Ehle of BASF, Mike McDonnell of TPC and Grant Thomson of NOVA Chemicals, who discuss their views on shale and resulting planned investments. The picture certainly is one of renewed confidence and investment.

By: John Baker
+44 20 8652 3214

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