Breaking Ground

The announcement last week from Chevron Phillips Chemical (CPC) that it had ‘broken ground’ at the site of what will eventually become its new 1.5 million tonne per year cracker at its complex in Cedar Bayou was significant. Why? Well, it is likely to be the first built in the US for over a decade.

This is certainly a milestone for the company and indeed the country as oil and chemical producers jostle with each other for a slice of the shale gas pie. In fact, over 10 new crackers have been announced on top of several expansions for existing plants. Should all of these be built then US ethylene capacity is projected to increase by as much as 51% by 2020 to over 41 million tonnes per year, according to ICIS. The likelihood that all ten will be built is reasonably high as seven projects are already beyond the feasibility stage and seven of the groups involved have announced capacity figures for eight of their crackers. Within the last three months of 2013 and early 2014, three new projects were announced all of which are being proposed or backed by foreign based companies, which goes someway to show how shale gas is viewed.

There is no doubt that an almost ruthless determination has been adopted to exploit the shale gas reserves within the US. The US government, at both federal and state level, has been proactive in finding ways to make it easier for these reserves to be exploited whilst striking a balance with the right level of regulation. A fact not lost on producers looking to develop a shale gas strategy in Europe. By allowing such levels of investment the US has secured a strong future for its chemicals industry – the American Chemistry Council (ACC) recently announcing that over $100.2 billion is being invested in 148 projects (projects, expansions and process changes). This figure is simply staggering and can only be further boosted by the fact that the new investment could lead to as much as $81 billion per year in new chemical industry output and 637,000 new jobs for the US economy between 2010 and 2023.

For the world’s largest economy that was brought to its knees by the global financial crisis, unlocking the potential of shale gas has been a central pillar of its revival. In terms of the chemical industry that was faced with growing Middle East and Asian competition and a rather static European sector this is nothing short of a godsend. This is why the beginnings of construction on CPC’s new Cedar Bayou cracker is important – the impact that shale gas and associated downstream projects will have on the Specialised Products markets in the future will be considerable for all involved and so we wait and watch to see what will happen!

SP blog 22 April

This entry was posted in Chemicals, Clarksons, Commodities, Shipbroking, Shipping, Uncategorized and tagged . Bookmark the permalink.

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