Investment surge from shale boom may be bigger than predicted

26 March 2014 19:40  [Source: ICIS news]

HOUSTON (ICIS)--The coming investment surge generated in the US by affordable energy could exceed any current projections, but how fast it gets here depends on how nimbly the industry sidesteps some roadblocks, a Dow executive said on Wednesday.

"The investment surge is not what we expected it to be, in fact, it could very well be much bigger - bigger than we believed six months ago, bigger than we could have hoped a year ago and bigger than anyone would've predicted five years ago," Jim Fitterling, Dow executive vice president, feedstocks, performance plastics, supply chain, said during the IHS Chemical World Petrochemical Conference.

There are more than 120 energy-related or energy-intensive projects, representing more than $100bn of new investments, currently planned in the US. This is made possible because of the technology allow us to extract more energy more efficiently, he said.

That technology has spurred waves of investment.

The first investment wave, from upstream producers, began a few years ago and there is high confidence that it will continue. The second wave, is companies betting that the cheap and plentiful energy supplied by the first wave will continue, Fitterling said.

Along with this second wave, is investment in chemicals production. There are 10 new ethane crackers and around 10 expansions announced as planned. If all go through as planned, the US could see an increase in ethylene production of 50%, he said.

The third wave involves investment by downstream companies operating nearby or co-locating for steam and power advantages. The fourth wave involves investment in research and development, like Dow's planned research center in Texas, Fitterling said.

All four investment waves have begun and are expected to increase, but there are at least two known issues - skilled labour availability and the ability to maintain the US energy advantage - that could slow down the growth, he said.

Engineers and skilled craftspeople are in short supply already, but planned construction and expansions will increase labour concerns. These projects are coming online as the baby boomer generation is retiring. Without students in science, engineering, technology and mathematics (STEM) to replace them, investments and projects could be held up by labour shortages, he said.

Another issue that could slow down investment is risking the affordable energy the shale boom wrought by allowing unfettered exports. The cost-advantage the US has, led to a resurgence in the chemicals and manufacturing industries. Higher prices for energy and feedstocks could slow that resurgence, he said.

"Natural gas is becoming not a transition fuel to the future, but likely one of the country's baseline fuels. And that means it must be managed as such, " Fitterling said.

The IHS Chemical World Petrochemical Conference runs through Friday.

By: Jessie Waldheim

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