According to Greg Nevermann, manager of LyondellBasell's Houston refinery, there are a number of distinct advantages that come with the oil, gas and petrochemical industries being based on the U.S. Gulf Coast.
"To start with, if you're on the Gulf Coast, the refineries that are built here are some of the most complex in the world, which means we can take the lowest cost [and] most difficult feeds and turn them into high-value products better than just about any system in the world," Nevermann said. "So we're very, very competitive on a global basis. We've also got access to low-cost energy, and natural gas prices are really low here, compared to the rest of the world. And we've got a first-class workforce. So we're positioned to be very, very competitive from a global standpoint here on the U.S. Gulf Coast."
Tim Sutherland, general manager of Chevron's Pasadena, Texas, refinery, said he agrees with Nevermann about the advantages of locating industry facilities on the Gulf Coast.
On May 1, Chevron acquired a refinery in Pasadena, bringing its roster of U.S. refineries to five plants.
"It's a 100,000-barrel-per-day unit," Sutherland said, joining Nevermann on a panel at the Gulf Coast Industry Forum held recently in Pasadena. "It's not particularly complex, but it does run all West Texas crudes."
Likewise, Sutherland explained, Chevron intends "to do as much as we can here in Pasadena" while integrating with its Pascagoula, Mississippi, plant.
"Again, Pasadena is a 100,000-barrel- per-day unit, and Pascagoula is an over 300,000-barrel-per-day unit, so we're a little mismatched," Sutherland said. "But we've already successfully trained intermediates back and forth between them."
Referring to the company's production strategy, Sutherland noted Chevron's "big holdings" in the Permian Basin. The company's production forecast out of the Permian is going to increase, he said, "so we wanted some direct control over those crude barrels. Again, Pasadena runs West Texas crudes now, and it will in the future, too, but it's [also] going to run Chevron crudes."
Finally, Sutherland praised the merits of Gulf Coast accessibility.
"It's just the location. It's got the pipelines, the Kinder terminals, the neighbors -- I mean, Pasadena is right in the middle of everything. So, 'location, location, location,' as they say," he explained.
"All of us produce a product that we want to provide for our customers that enables mobility, and we want to all come to the marketplace and compete," said co-panelist Brook Vickery, vice president and refining manager for Flint Hills Resources. "We all want to do our best at competing, and we're at a really good spot on the Gulf Coast to do that."
The future of refining
Switching the panel's focus to what the future holds for the refining industry, Nevermann noted alternative fuels and electric vehicles will eventually have an impact on demand, "but that's not forecast to be for quite a while."
"There's still a lot of cars on the road, so a lot of the growth in demand is really in the third-world countries and third-world economies, and that's where we expect to see the growth continue," he said.
As more time passes, petrochemical growth may be somewhat muted by new technologies and energy efficiency standards, he said.
"The CAFE (corporate average fuel economy) standards have probably one of the biggest impacts on overall demand, especially here in the United States," Nevermann said. "But we feel that's going to slow the growth for a period of time before ultimately getting to peak oil or gasoline. For the near term, we feel demand growth is still going to be there."
