When asked to identify the main issue facing Texas' petrochemical industry, Texas Railroad Commissioner Ryan Sitton pulled no punches.
"It's the supply chain," Sitton said.
Noting most analysts believe the Permian Basin to be the largest producible future oil reserve in the world, Sitton said it is vital for industry leaders to provide a means to transport that abundance of oil and natural gas to market to meet the growing global demand.
"I don't just mean to a refinery on the Gulf Coast or how we're going to get that natural gas to homes across the western part of the United States," Sitton said. "I'm talking about all over the world, to places like China where they are building more refineries today than anywhere else in the world. They'd love to run our light, sweet crude."
Discussing what Texas' production boom means for the petrochemical industry and its accompanying logistics at the Petrochemical Supply Chain and Logistics Conference held recently in Houston, Sitton noted Mexico has aspirations of doubling its amount of electricity generation in the next 10 years, based largely on U.S. natural gas.
"Pipelines, import/export terminals, trucks, shipping containers -- all of these play very complex roles in the future of this industry," he said. "People like me -- regulators -- are asking the question, 'What do we need to be doing to make sure that Texas can capitalize on this opportunity?'"
To adequately understand the magnitude of supply chain demand, Sitton said it is essential to think at the macro level of "global supply, global movement of products," stressing the world's demand for natural gas is growing faster than demand for all other energy sources combined.
"In other words, the world is asking for more natural gas than it's asking for oil, coal, nuclear, solar and wind combined," he said. "We've got a lot of it here [in Texas], and we can do a lot with it."
Sitton stressed this is not simply going to be an industry challenge.
"It will also be a regulatory challenge, and it will be a technological challenge," he said.
Rising to the challenge of politics
Regarding technological advancement, Sitton said there has probably not been a historical moment in his lifetime when demand for creative solutions was as high as it is today.
"I'm talking from a fairly Texas-focused perspective, with Texas producing 4.5 million barrels of crude oil today and over 20 billion cubic feet of gas. Those two numbers are going to double over the next 10 years," he said. "Can you imagine the demands on pipelines and movement of product?"
In addition to finding new solutions to transporting Texas' energy products to market, Sitton said another consideration for chemical manufacturers is managing the price of basic feedstock.
In mid-November 2018, the price of natural gas jumped by 18 percent based on cold weather forecasts, Sitton noted.
"That's the biggest jump natural gas prices have seen in 10 years," he said.
Sitton charged listeners to consider how the petrochemical industry will shift technology and services, as well as adapt to regulations to find the solutions to these pressing problems. Major companies, he continued, must work with the government to provide viable solutions -- though that collaboration, he admitted, will not be easy.
"Face it: The world of politics is not a very good one at solving problems, especially today," Sitton said. "The level of vitriol, the level of frustration and the angst in politics are making things very difficult. So even more emphasis and onus is on suppliers and technology companies -- and companies in general -- to make these advances and demonstrate what can be done, because we can't depend on the government to be the leader."
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