Ten years after the North American petrochemical industry was retrenching and rationalizing capacity, conditions have entirely reversed, and the surge could be even bigger than previously believed.

Jim Fitterling, Dow Chemical's executive vice president for feedstocks, performance plastics and supply chain, shared his positive viewpoint on the changing energy landscape at the IHS Chemical World Petrochemical Conference and Workshop on Wednesday.

 

Fitterling said the investments surge in petrochemicals may have been underestimated over the past two to three years. Over 120 new energy-related projects have been announced in North America, with nearly $100 billion to be invested in these projects. More than one-third of the announced projects will be located in Texas and Louisiana.

Such a capacity ramp-up could set the US on the pathway to soon being a net exporter of petrochemicals, according to Fitterling.

This investment will occur in waves. The first wave was the investment by the upstream in finding and producing new reserves. The API predicts that nearly $5 trillion will be invested by the upstream through 2015.

The second investment wave involves the chemical and steel industries. “The energy revolution is real,” said Fitterling. For steel manufacturing, which is a high-energy consumer, the much energy rates support reduced per unit cost for US manufacturers. In fact, US energy costs are one-third to one-half less than in Europe. 

In North America, 10 new ethylene crackers have been announced due to lower natural gas pricing; eight of the crackers are slated to be based in the US. Six of the proposed crackers have already moved beyond the feasibility stage. 

In addition, 10 debottlenecking and/or revamp projects have also been announced. As such, there is enormous potential by the US petrochemical industry, Fitterling explained.

The third wave of investment will be by the downstream to use steam and power. And the fourth, or final, wave of investment will attract intellectual groups and more research and development (R&D) facilities to support the new manufacturing centers. To that end, Dow is planning a new R&D center to be built at Lake Jackson, Texas, to support the company’s manufacturing facility in nearby Freeport.

The next phase of prosperity for the petrochemical industry involves newly-available feedstocks, upgraded manufacturing facilities, and the continued advancement of intellectual properties and R&D.

Everything is not perfect, he cautioned, noting that the future of the US petrochemical industry energy has several hurdles to clear. 

The first concern is the lack of talent to build and operate the new facilities. The industry needs science, technology, engineering, and mathematics (STEM) workers to support this economic wave. 

The available skilled crafts, likewise, are in short supply as the senior members of the workforce plan to retire. A recent API study estimates that nearly half of the energy industry’s workforce will retire over the next 5 to 10 years.

The second issue is the lack of US energy policy, he said. With the new resources, US energy policy has not kept pace with the industry. The quick abundance of natural gas prompted action to export the LNG and fast-track new liquefaction facilities. 

The members of the petrochemical industry are concerned that action without a solid plan could put domestic companies at a disadvantage. Energy policy should be devised to keep the domestic petrochemical industry competitive within the global markets, he said.

But Fitterling closed on a positive note, saying the US petrochemical industry is poised for an economic revolution and should soon capitalize on it.