The growing supply of highly affordable natural gas from shale formations is playing a pivotal role in the renaissance of the American petrochemical industry. As a result, companies and investors are putting up billions of dollars for construction and expansion projects across the nation.
Some of the greatest investment activity is occurring on the Texas Gulf Coast in areas such as the Houston Ship Channel and surrounding communities, which are poised to see the results of $35 billion in already announced capital and maintenance investments, including several petrochemical expansion projects that will spur the area’s economy while adding thousands of temporary and hundreds of permanent jobs.
Managers from the ExxonMobil and the Chevron Phillips Chemical Co. plants in Baytown joined two energy industry experts to discuss those projects during the recent Petrochemical & Maritime Outlook Conference in Pasadena, which was sponsored by the Economic Alliance Houston Port Region, a nonprofit that provides professional developmental services for 27 cities and chambers of commerce from areas surrounding the 52-mile ship channel.
The four men agreed shale gas was the “game changer” for the petrochemical industry and Texas.
Hector Rivero, president and CEO of the Texas Chemical Council (TCC), said, “Access to shale gas has the potential to dramatically boost the competitiveness of Texas and America with increased job growth and global exports.”
Rudy Underwood, senior director of Governmental Affairs for the American Chemistry Council (ACC), said natural gas from shale formations is the most important discovery in the past 50 years.
“Natural gas is to industry what flour is to a bakery,” he said. “It’s the material we use to make things. About 96 percent of all manufactured products have parts of chemistry imbedded in them.”
Underwood said natural gas is driving significant capital investments in U.S. manufacturing, and some of that money is coming from foreign investors.
“You don’t see major corporations putting this kind of money on the ground without knowing this is a long-term deal,” he said. “The numbers are increasing all the time. We revise them every Thursday, and right now, 125 projects have been announced with investments of $84 billion.”
Chevron Phillips plans expansions at Cedar Bayou, Old Ocean
The city of Baytown, just east of Houston near the Harris County/Chambers County line, is home to two of those expansion projects. Evidence of the coming construction boom is clearly noticeable to motorists on Interstate 10, which passes by the Chevron Phillips plant at Cedar Bayou.
Plant Manager Van Long, who took over in 2008, has his work force preparing the 1,400-acre site for the company’s largest proposed expansion project in decades. The U.S. Gulf Coast Petrochemicals Project includes a new ethane cracker at Cedar Bayou and two polyethylene units at the company’s Old Ocean plant in Sweeny, southwest of Houston.
“Some people might ask, ‘Why build the cracker at the Cedar Bayou plant?’” Long said. “Well, the Cedar Bayou plant is Chevron Phillips’ largest site in the United States and has an outstanding work force. It also has infrastructure in place, such as pipelines, and it’s near the largest fractionation hub in the United States.”
The Cedar Bayou and Old Ocean projects currently are in the engineering stage.
“The permitting is completed for both expansions, and the front-end engineering and design phase has been done,” Long said.
The projects will involve about 10,000 temporary engineering and construction jobs and create about 400 new jobs for daily operations and maintenance. Completion is scheduled for 2017.
Long said the company currently is building a 1-hexene unit at Cedar Bayou that will begin operation in 2014 and make an intermediate used in the production of polyethylene for containers, plastic pipe and other plastic products.
“That project has about 1,000 construction and engineering jobs, and will have 14 long-term positions,” Long said.
Chevron Phillips also is in the early stages of an NAO (normal alpha olefins) Expansion Study for a 20-percent production capacity increase in a phased approach.
“NOA is a derivative of ethylene that is used in making polyethylene for product such as paraffin waxes and synthetic lubricants,” Long said. “We’re studying that expansion now. Approval requests for any project would be made in 2014, with construction to begin in 2014, and completion set for 2015.
“That project would involve 100 short-term construction and service-oriented jobs.”
ExxonMobil awaits permits for world-class steam cracker
Woody Paul, manager of ExxonMobil’s olefins plant in Baytown, didn’t anticipate the turnaround of fortune for the U.S. chemical industry.
“When I went overseas 10 years ago, North America and the United States were what we call a ‘mature region,’ where we didn’t anticipate any great growth or a lot of investments, especially grass-roots investments. When I came back in June, I discovered what a difference 10 years makes.”
Paul said ExxonMobil is waiting for permits from the EPA and the Texas Commission on Environmental Quality to build a world-class steam cracker in Baytown, which will be connected with two premium polyethylene lines at ExxonMobil’s plastics plant in nearby Mont Belvieu. The two plants are the company’s largest petrochemical complex in the world.
The company hopes to begin work on new units in 2016.
“This proposed expansion really speaks for our confidence in the natural gas-driven revitalization of our industry,” Paul said. “Coupled with our global sales and marketing force and our technology force, this expansion will allow us to continue to supply the growth and demand we see across the world for high value polyethylene products.”
Paul said the project will require 10,000 construction jobs and 350 permanent jobs for operations and maintenance, adding to the company’s current work force of 6,500 employees and contractors.
Paul said his company estimates the new permanent jobs will create another 3,700 jobs in the local communities.
“ExxonMobil also projects an $870 million per year economic impact and around $90 million in new tax revenue for communities in the Greater Houston area,” Paul said.
Work force issues, growth require community collaboration
Another very important asset Chevron Phillips found in Baytown was community support, Long said.
“Preparing for the growth required involving the community, The City of Baytown hosted a 2012 meeting with industry and various economic and government agencies, colleges and schools,” he said. “We started talking about what this could do for our community. We went away from the meeting with two major thoughts — industry needs to cooperate with local government and agencies to make this happen, and we need to be proactive in our process of doing that.
“Since then, Chevron Phillips has been in the forefront of that effort to prepare for the construction that will begin in 2014, 2015 and 2016.
“One of the first things we did is enter into a Tax Reinvestment Incentive Zone agreement with the City of Baytown and Harris County in which we fronted $6.9 million to expand Sjolander Road, which will become a major road as construction workers access our facilities.”
Long said the agreement was approved, and the groundbreaking for the road work was June 10.
“Today, nearly 75 percent of that road is completed, and it should be finished this November,” he said.
Chevron Phillips also provided $1.8 million to fund the hiring of six new Baytown police officers and the purchase of three police vehicles.
“The power of this collaboration is helping us prepare for what is going to happen in the next several years,” Long said.
When the new projects are completed, the No. 1 challenge for the chemical companies will be finding skilled employees to replenish a work force that is top-heavy with personnel who will be retiring soon.
Long said, “For at least the next five years we are very involved in growth, and we also are at a time in our industry when we are having a lot of people retire. So, we are not only looking at growth, we also are trying to supplement the work force that is retiring. We are very active in the colleges and high schools in encouraging students to get into the petrochemical industry.”
“Chevron Phillips is working with Lee College to develop future employees. The company donated $75,000 to start a scholarship program and update student laboratories.
“We have some great opportunities, but we also have some great challenges. And collectively, we are meeting those challenges.”
ExxonMobil is funding a $500,000 work force training program to prepare hundreds of local residents for high-paying jobs in the growing chemical manufacturing industry.
The program, managed by Lee College’s Workforce and Community Development Center, also involves eight other Houston-area community colleges, including San Jacinto College and College of the Mainland.
For more information, visit www.allianceportregion.com or call (281) 476-9176.
