The makers of chemicals that go into nearly every product – from plastic wraps to diapers – are celebrating an era of opportunity that is in danger of faltering because of American policy, a Dow Chemical executive said Tuesday.
Petrochemical executives are meeting at the Hilton Americas-Houston this week for the IHS World Petrochemical Conference, where they are discussing the shifting manufacturing landscape created by cheap American natural gas.
It has prompted companies to announce massive expansions within the United States, totaling more than $95 billion, by Dow’s estimates, with many plants planned in Texas.
But the opportunity for new manufacturing plants and jobs hinges on natural gas prices staying low, a factor that could change if the United States allows more of the resource to be exported, said Brian Ames, president of Dow’s olefins, aromatics and alternatives business.
Dow has led an aggressive campaign to oppose a wide expansion of pro-jects that would liquefy natural gas and ship it to other countries, arguing that a large amount of exports would drive up domestic prices.
While Dow supports some exports, the company is pushing for limits. Although it’s considered unlikely that federal officials will green-light all natural gas export projects awaiting permits, Ames said the combined effect of those plans would be negative for the nation.
“If you add up the sum of those different opportunities, it’s basically half of the total U.S. demand (today) and that causes us to question what’s going to happen to the price,” Ames said.
Petrochemical companies use ethane and propane, which are produced with natural gas, to make chemical building blocks that are used to make 90 percent of the products Dow sells.
And prices for those feedstocks lately have benefited manufacturers, who are enjoying deep discounts because of surpluses in the U.S.
Average ethane prices fell 48 percent last year compared with 2011, and average propane prices were down 32 percent, according to the U.S. Energy Information Administration.
Those price drops contribute to the flood of new petrochemical investments, including Dow Chemical’s $4 billion plan to expand its facilities along the U.S. Gulf Coast.
Supporters of broad natural gas exports have cited a government-backed study by NERA Economic Consulting that said further overseas shipments would have a net economic benefit for the nation, despite some declining manufacturing activity. Dow commissioned its own study, by Charles River Associates, that highlighted the economic advantages of using natural gas for manufacturing over exports.
The real effect of more exports could be lost plants, Ames said. Although new plants are planned, “final investment decisions won’t be made until another year from now,” Ames said.
Asked if some of Dow’s plans would be canceled if exports are widely approved, Ames said: “I’m not saying that they will, because it’s all a matter of degree, but obviously our board and our company are looking at this carefully because this is an important factor for making these investment decisions. And we’re not alone, the whole industry has to think about this.”