There’s no point in denying the obvious: The recent decline in crude pricing has resulted in depressed energy markets in North America.
“I grant you the world has changed, and the shale-induced party is a little quieter than it was a year ago,” Peter L. Cella, president and CEO of Chevron Phillips Chemical Co. LP, admitted. “Yes, the global ethylene cost-curve has flattened. Yes, global ethylene and derivative prices are lower. Yes, markets for U.S. NGL-based crackers are depressed. But even though crude prices today are half of what they were one or two years ago, market expectations five years out aren’t dramatically different than they were one or two years ago. The U.S. was and is still is a great place to invest.”
Discussing strategies for managing North America’s renewed growth with delegates at the 2015 IHS World Petrochemical Conference, Cella pointed to the strong demand and growth for chemicals and plastics in the world’s expanding middle class and referred to that relationship as “symbiotic.”
“As the chemical industry develops, it provides better, more sustainable products that lead to social and economic benefits, which lead to improved quality of life,” Cella said, citing a statement from the American Chemical Council (ACC). “This improved standard of living leads to demand and discretionary income to purchase even more consumer products.”
The United Nations projects the world’s population will grow from its current figure of 7 billion to 8 billion by 2030, with the global middle class predicted to grow from under 2 billion people today to nearly 5 billion in less than 20 years.
“The economic growth that accompanies this rise in the middle class should generate significant demand for the products we produce,” Cella said.
According to IHS, the world needs the equivalent of more than 40 new, world-scale crackers to be built over the next 10 years to satisfy global demand growth for polyethylene and other methylene derivatives.
“As a comparison, this is about the same level of growth that, in the last period, took us about 17 years to achieve,” Cella said. “Our industry intends to meet this significant demand growth with a range of ethylene producing investments.”
The ACC reports more than 200 new chemical projects have been announced in the U.S., representing a total of $137 billion in new investments, Cella said.
“These investors are expected to directly generate 60,000 new chemical industry jobs, but the economic impact doesn’t stop there,” he added. “The overall impact, including all the indirect jobs needed to serve these new chemical plants and their workers is about 700,000 permanent new jobs and $274 billion in U.S. economic output by 2023.”
The single greatest constraint affecting the industry’s ability to fully capture the potential offered by the development of shale resources, Cella said, is the shortage of “gold collar workers,” or qualified labor, to build, operate and maintain these projected assets.
In addition to closing the labor gap, Cella said fixing and expanding the nation’s highways and railways is vital.
“As the industry works to introduce another 6 million tons per year of polyethylene capacity over the next five years, we will need the ability to move product efficiently and safely to customers world-wide in a cost-effective manner,” he said. “We are convinced of the long-term growth prospects for the chemicals and plastics business, and we are scouring the world for the next major investment, as well as that next major process or product. That’s why we say the party’s far from over, and at Chevron Phillips Chemical, we’re still dancing.”
For more information, visit www.cpchem.com or call (832) 813-4100.