US will have petrochemical industry advantage for a decade – ACC

16 April 2013 18:42  [Source: ICIS news]

SAN FRANCISCO (ICIS)--The US will have a competitve advantage in extracting shale gas and producing petrochemicals for at least the next decade, the president of the American Chemistry Council (ACC) said on Tuesday.

Speaking at the International Institute for Synthetic Rubber Producers (IISRP) Annual General Meeting, former US congressman Cal Dooley said he sees the spread between the cost of natural gas and oil in the US versus the rest of the world sustained “for quite some time.”

“Affordable, competitively priced natural gas is driving significant new capital investment in the US manufacturing sector,” Dooley said in the annual meeting’s keynote address. He also said he sees the US enjoying a “long-term sustained opportunity in feedstock supply and cost” compared with the rest of the world.

He noted that the chemical industry has announced about $55bn (€42bn) in new capital investments in more than 70 US projects over the next four to five years.

Dooley said that in 2008, the average cost of ethane in the US was 93 cents/gal.. Now it’s about 25 cents/gal.

The US can now produce ethylene at about $400/tonne, compared with $1,200/tonne in the EU and $1,700/tonne in Japan, he said.

According to Dooley, this renaissance in chemical manufacturing will contribute about $67bn in added output to US GDP by 2020. He estimated there will be 310,000 new jobs directly related to the chemical industry, and another 327,000 indirect jobs. The ACC estimates that because of cheap feedstocks the US will see reduced manufacturing costs of about $11.6bn/year by 2025, which will contribute about 1% toward US GDP growth.

Dooley did cite several notes of caution, mainly related to the US regulatory environment at the federal level. For instance, he noted that while President Barack Obama has taken credit for the increases in domestic energy production, almost all of it has occurred on private land and new technologies have been developed mostly by private companies.

“President Obama hasn’t done much to impede development,” he said, “But the industry has not been able to develop oil and natural gas resources on public lands.”

Dooley also said the ACC has some lingering concerns about the US Environmental Protection Agency’s (EPA) plans to the Clean Air Act to deal with emissions.

“Most importantly, emissions of methane,” Dooley said. “It could constrain production of natural gas. We are working to make sure that doesn’t happen.”

He said the ACC is also watching a new EPA study due out early in 2014 and how it could lead to new standards for hydraulic fracturing.

“I’m confident that the production side can demonstrate that we have the technology to extract natural gas and oil in an environmentally responsible way,” Dooley said.

But he said industry prefers that fracking standards be left up to the states, and not the federal government, because of differences in geology from region to region.

“Our industry and the US economy will be best served if we have policies in place that don’t constrain energy supply in the US,” Dooley said. “Let’s make sure that we have the regulations in place that address environmental and health issues, but let’s also maximize production.”

Dooley emphasized that regulation matter because “it’s not just happenstance that almost all the research and development of genetically-modified foods is now done in the US. It’s not just an accident that EU-based companies are doing most of their research and development in the US. They’re doing it because of the regulatory environment.”

More specifically, Dooley said that the industry needs to work to make sure that the US does not become Europe in terms of energy-industry regulation. He noted that France has banned fracking, Spain is talking about banning fracking, and Germany is moving away from nuclear energy.

“We see a trend line in the EU of increasing costs for energy and feedstocks,” Dooley said. “The US can capitalise on this by maintaining a steady regulatory environment.”

He noted that since 2009, German chemicals giant BASF has invested $5.7bn in the US in increased chemical manufacturing. If the US remains friendly to the chemistry industry in terms of regulation, Dooley said the ACC projects $58bn in potential exports growth plus new export-dependent jobs in the US chemical industry over the next decade.

($1 = €0.77)

By: Mark Yost
+1 713 525 2653

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