BIC Magazine recently spoke to AFPM President Charles Drevna to discuss refining and petrochemical industry hot topics including rail transport safety, Keystone XL, crude oil exports and shale oil.
BIC: With our current infrastructure and safety concerns, do we have what it takes to support the dramatic increase in crude oil now being transported by rail?
DREVNA: The safe and efficient movement of crude oil by rail is and must be a collaborative effort among shippers, the railroads and government. AFPM members are committed to working with all to advance and ensure this effort. Although crude oil has traditionally been transported by pipelines, since 2009 there has been a marked increase in the use of rail as a result of production of shale oil in North Dakota and other regions of the country. These newly developed resources, in many cases, will be dependent on rail transport going forward since construction of new pipelines is problematic due to cost, permitting and geographic considerations.
To meet the demand, producers have made significant investments in the infrastructure necessary to transport crude by rail. While pipelines will be the dominate mode of crude oil deliveries, rail shipments are and will remain a vital part of our nation’s energy infrastructure.
BIC: Could approval of the Keystone XL pipeline help manage the load?
DREVNA: Unquestionably, the approval of the Keystone XL pipeline will help manage the increased capacity of crude oil movement throughout the United States. But it will do far more than that. It will immediately create thousands of new jobs, have a substantial positive impact on our economy and enhance our national security. Administrations since the Nixon era have been striving for energy security, if not independence. Approval of the Keystone XL pipeline would be a significant step in convincing the rest of the world the United States is serious about our energy future. Combining forces with Canada — an ally, friend and neighbor — will set North America on the path we have been determined to achieve for more than 40 years.
BIC: With domestic oil production booming and the current ban on crude oil exports, does the United States have more oil than its refineries can handle?
DREVNA: The U.S. refining industry is undoubtedly the most efficient and technologically advanced system in the world. While the demands of the American consumer continue to be met, this efficiency has enabled many U.S. refiners to be more than competitive in the global marketplace. This translates directly into stable and even increased employment for American workers along with a most positive impact on the nation’s balance of trade.
With the advent of newly developed shale oil production, some logistical problems have been identified regarding crude oil distribution in the United States. Policy makers should regard this situation as an opportunity, not a problem, and adopt a real energy policy that addresses all barriers to free trade and open markets.
BIC: How is the U.S. shale boom affecting manufacturing costs?
DREVNA: The shale revolution and the boom in other unconventional oil and gas development have resulted in a combination of lower feedstocks and energy costs. This, combined with advantages in the United States in infrastructure, diverse manufacturing capabilities and the ability to innovate quickly, has put our nation in a competitive position in chemical manufacturing for the first time in decades and has signified the early stages of a re-birth of the U.S. manufacturing sector.
This expansion is a dramatic reversal from the mid-2000s, when the United States was one of the world’s most expensive locations for manufacturing chemicals, to today where it is among the most affordable. Shale development has since been instrumental in generating a wealth of natural gas liquids, a vital feedstock that is the building block for the magnitude of products supplied by our nation’s manufacturers. Responsible development of these reserves has allowed the U.S. petrochemical industry to enjoy its best competitive advantage in more than 30 years.
As a result, chemical companies that had abandoned the United States, along with others around the world, have taken notice and have announced planned or possible investments in the United States worth more than $91 billion. According to IHS Global Insight, by 2025, nearly 515,000 manufacturing jobs will be supported by unconventional oil and gas development and, along with energy-related chemicals, will contribute nearly $533 billion annually to the gross domestic product by that time.
But, a vibrant petrochemical manufacturing sector, however, is just the first step in a resurgence of the manufacturing sector. Petrochemicals provide a ripple effect on the manufacturing industry as a whole because they are a key component of the supply chain for many other industries. A strong overall manufacturing sector can foster a robust and stable economy with well-paying jobs that are vital to our way of life.
For more information, visit www.afpm.org or call (202) 457-0480.
