Recent and significant volatility impacting global oil markets has prompted industry leaders to ask how these changes will affect gas-based chemical producers, who, until recently, were benefitting from the wide differential between oil and natural gas prices. In particular, they question how the change in energy markets will impact the renaissance underway in the U.S. chemical industry.
Considering these dynamics, ExxonMobil Chemical Co. Senior Vice President Matt Aguiar believes it is important to recognize while the price of oil has changed, many things about the petrochemical industry have not and are not about to change anytime soon.
“These include North America’s abundant shale resources, giving rise to a sustained energy advantage; the importance of operating efficiency and flexibility to thrive across commodity and feedstock cycles; and, lastly, the positive long-term outlook for chemical demand,” Aguiar said, addressing the 2015 IHS World Petrochemical Conference. “I think it’s fitting we meet on the heels of the Houston Rodeo because sometimes the petrochemical market can feel like a pretty wild ride!
“In the 30 years since this conference began, our industry has been bucked by countless turns of events, many of which we never saw coming. We should heed to advice of professional bull riders, who say the key is to stay focused, don’t get distracted and maintain a center of gravity because you can’t predict what’s coming next.”
Aguiar noted changing oil prices have not changed the fact shale production technologies have unlocked an abundant long-term supply of natural gas in the region.
“U.S. gas production has grown by 45 percent over the past six years. The nation has a nearly 100-year natural gas supply, and it’s still growing,” he said. “This means North American chemical producers will continue to have an abundant long-term supply of ethane and other NGLs for feedstock. It also means plenty of natural gas to power manufacturing operations, which is just as important because energy represents about half the cost to manufacture chemicals.”
ExxonMobil remains very positive on North America, Aguiar continued and referred specifically to ExxonMobil’s expansion of its Baytown facility. “As demand for chemicals continues to outpace overall energy demand, the production of chemicals will assume an even larger role in the global energy landscape,” he said.
According to Aguiar, the production of chemicals currently accounts for about 15 percent of global oil demand and 10 percent of natural gas demand, and includes more than 45 percent of the demand for NGL.
“No industry is more influenced by changes in energy prices than petrochemicals,” Aguiar added. “We are the world’s largest industrial energy user, and the only one that uses energy for both fuel and feedstock. The American Chemistry Council estimates energy can account for up to 85 percent of the cost to make petrochemicals.”
As the world continues to look to the petrochemical industry for the building blocks of economic growth and human progress, Aguiar stressed industry leaders must look past short-term volatility in energy markets to see the bigger picture.
“Demand for chemicals is strong and shale technologies have unlocked a tremendous new source of energy and feed-stock for meeting that demand,” he said.
For more information, visit www.exxonmobil.com or call (972) 444-1000.
