Shale Gas Impact on the US Petrochemical Industry

How much things can change in eight years!  Eight years ago, in 2006, I attended National Petroleum Refiners Association (now American Fuel and Petrochemical Manufacturers) International Petrochemical Conference in San Antonio, Texas.  The presentations and discussions at the conference tolled the funeral bell for the US petrochemical industry and prompted me to write an article stressing the importance of integration of the petrochemical industry to its survival:

Integrate to Survive BIC reprint

Re-reading the article it’s hard to believe where the industry finds itself now!  Since then the increase in the price of oil has driven shale oil and gas development and the US petrochemical industry (perhaps it should be called gasochemical industry now) is booming yet again.  In the boom times it is easy to forget that the industry was on the ropes just eight years ago.  However, continuing deep integration of the US Gulf Coast petrochemical industry would be prudent.  Finding funds for integration should be easier during boom times and everyone knows that booms are usually followed by crashes.  The concept of integration to combat unfavorable feedstock, energy or labor prices isn’t new.  BASF, the German chemical giant, has made it a corporate core competency (http://www2.basf.us/about/verbund.html).

However, global corporations typically go where feedstocks, energy and, to a lesser degree, labor costs are low.  Saudi Arabia yesterday, US Gulf Coast today, perhaps Russia or Australia tomorrow.  The US Gulf Coast state and local governments are the stakeholders most interested in keeping the industry here.  The article’s suggestion to integrate across a geographical region rather than across a single production site, I think, is still relevant.

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3 thoughts on “Shale Gas Impact on the US Petrochemical Industry

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