The American Chemistry Council (ACC) has done a superb job documenting all the downstream projects that in the works all 268 of them totaling more $170 billion dollars. As many of you know in the O&G supply chain the biggest opportunities are downstream. The ACC definitely drives this point home with this article.
One overriding question regarding this activity, will there be enough workers for these projects? We’ll be monitoring them to let you know.
Here’s a tip: Keep an eye out for terms like ethane, ethylene, cracker and ammonia. These are keywords linked to a resurgence of domestic chemicals’ manufacturing might. The boom is so broad that it’s altering the global competitive landscape and luring a large segment of the chemical trades back to U.S. shores.
At least 268 production projects are in the works, totaling more than $170 billion in corporate capital spending, according to the American Chemistry Council. Some 60% of that spending is direct foreign investment. The building boom has tapped much of the available capacity among engineering and construction firms, including Bechtel and Fluor (FLR). It has sucked up steel from distributors like Ryerson Holding (RYI) and Olympic Steel (ZEUS). And it has boosted manufacturers of components for energy, refinery and processing plants.
The root cause driving this industrial bonanza: natural gas from shale rock.
Fluor and Japan’s JGC are managing the $6 billion construction of a new, 1.5 million metric ton-per-year ethane cracker for Chevron Phillips Chemical in the company’s existing Cedar Bayou Complex in Baytown, Texas. (Fluor)
Fluor and Japan’s JGC are managing the $6 billion construction of a new, 1.5 million metric ton-per-year ethane cracker for Chevron Phillips Chemical in the company’s existing Cedar Bayou Complex in Baytown, Texas. (Fluor)
Shale gas and its associated liquids provide basic raw materials for plastics, fertilizers and a host of other chemical products. The biggest piece of that picture is ethane, used to create ethylene — the starting point for most plastics.
“The U.S. producer who uses cheap gas can make a product for a fraction of what the higher-cost producers (are capable of), whether they be in Asia or whether they be in Europe,” said Fidelity equity analyst Mahmoud Sharaf, who also manages the Fidelity Select Chemicals Portfolio Fund (FSCHX).
The buildup is focused along the U.S. Gulf Coast, already the stronghold of U.S. refining and chemicals processing. But it reaches north, east and west.
Just north of Pittsburgh, Shell Chemical, a unit of Royal Dutch Shell (RDSA), is building a $6 billion ethylene refinery — called a cracker, because it breaks down or “cracks” ethane molecules to create ethylene. Thailand’s PTT Global is in the early engineering phases of a similar, $5 billion project in eastern Ohio.
A handful of ammonia-plant projects are scattered across California, Wyoming and Iowa. An approved ethane cracker is in early stages in North Dakota, and two new ethane crackers and three polyethylene-processing facilities are moving ahead in West Virginia.
All told, the ACC estimates that the new facilities will provide permanent jobs for 62,000 chemical professionals, in an industry where the average salary is a not-so-shabby $94,000. More broadly, the facilities should boost the economies surrounding those new plants by as many as 655,000 workers, the ACC figures.
The impact?
“It’s huge — at least in western Pennsylvania where there is not a lot of what I would call big chemical industry,” said Andrew Gellman, a professor of chemical engineering at Carnegie Mellon University.
Gellman points to the cracking plants going up in West Virginia, Ohio and Pennsylvania and says the question over the longer term is “whether or not the ethylene and propylene that the crackers create here gets used in this region” to make other products and thus expand the local economy, “or does it get shipped out?”
Joseph Barone
www.ShaleDirectories.com