Thanks to the shale revolution and its accompanying trickle-down economic expansion, petrochemical leaders and experts view the health of their industry as nothing less than robust.
“Five or six years ago, even though the technology was there, the application of it took our industry from a moderate growth, maybe stagnant, industry to one where we’re now talking about $40 billion in projects in the Gulf Coast area alone,” said Todd Monette. “The infrastructure investments that are happening to bring NGLs to the market make this a great story.”
Monette, plant manager at LyondellBasell, also serves as chairman of the board of the East Harris County Manufacturers Association (EHCMA), an industry coalition representing 130 facilities in the Gulf Coast region. He believes the impact of shale and the accompanying burst of supportive technology on the worldwide energy industry cannot be underestimated.
“Clearly, we have an opportunity to be a major mover and shaker in the energy industry in terms of setting the tone for our country,” Monette continued, addressing delegates at the recent 2014 Petrochemical and Maritime Outlook Conference.
That growth is just the beginning of the Gulf Coast’s economic expansion, according to Monette.
“There’s a lot more coming through the system,” he said. “Typically you don’t hear of a project less than $1 billion today.”
Monette pinpointed vital challenges that must be met to fully realize the potential of the region’s economic growth.
“Environmental improvement has to happen, and workforce development has to happen,” Monette said.
Building the ‘people pipeline’
Kaneka plant manager Steve Skarke warned there may not be “enough people in the pipeline” to fill the projected 30,000 new jobs generated by the influx of new investments in the Gulf Coast’s petrochemical industry. Skarke said he believes the workforce deficit is a result of a systemic misalignment of training and education programs for current jobs and future jobs, including the “education community paradigm” that a bachelor’s degree is the best path to prosperity.
“We know that’s not true,” Skarke said. “We know there are lots of other ways. Our industry has many of those examples.”
Outlining the high value of a two-year technical degree, Skarke noted with median first-year earnings averaging more than $50,000, graduates with two-year technical degrees are earning about $30,000 more than graduates with academic associate degrees.
“Chemical technologists starting out earn around $74,000,” Skarke, who also serves on EHCMA’s board of directors, said. “I can tell you just a few years after training in our plants, these folks are well into breaking six figures. There is incredible opportunity for those with two-year associate degrees or technical certificates.
“Workforce is the critical key piece where we’ve got to do some work. You’ve heard the number of over 30,000 jobs coming into Texas, but that’s a very low number; that’s more like direct jobs. When you add that to all the other jobs we need to create, it’s many more times that number.”
Dianal America (Mitsubishi Chemical) Director of Operations Jim Griffin agreed, adding workforce development requires a delicate balance of technology and human competence.
“Every day we improve the science in our industry. That’s why I think a lot of students are coming to our industry,” he said.
Griffin noted Houston is not only the U.S. largest export city but also leads the country in ethnic diversity. “That brings a great workforce to us,” he said.
Texas Chemical Council and Association of Chemical Industry of Texas President Hector Rivero said his organization provides not only 75,000 direct jobs throughout its member facilities and companies but also as many as 400,000 indirect jobs including contractors, vendors, service providers and affiliate small businesses.
Nearly $40 billion in chemical products are exported from Texas every year, Rivero said, and he agreed with Monette and Skarke that the figure for new industry investment is in excess of $40 billion.
“That’s great news,” he said. “But there are issues our industry and we as a community must face in order to realize all this investment and these jobs so our economy continues to thrive.”
Tax policy and the environment
Fortunately, Rivero said, the state of Texas is “doing well” monetarily.
“But we need to make sure our legislative leaders and government officials recognize the importance of having a fair and balanced tax policy,” he stated.
Rivero encouraged industry leaders to be diligent in discouraging inequities in the system that create a disadvantage for Texas to compete with other states seeking to “steal away” Texas’ booming investments.
“We need to make sure we’re protecting tax incentives that are critical in allowing Texas to compete not only with other states but also with other countries that are competing for investments,”
he said.
Regarding Texas’ civil justice reform, Rivero categorized the litigation environment as “incredible” due to reforms pushed by state leaders over the past five to 10 years.
“We need to make sure we protect against rollback of these reforms,” Rivero said.
“Threats against our water rights and our water use are being made by people trying to take advantage of endangered species,” he added, warning some litigants’ intent is not the protection of these creatures but rather the exploitation of their own political initiatives.
“We also need to make sure we’re not creating duplicative regulatory environments,” he said.
Regarding other environmental concerns, Rivero said regulators are “doing an incredibly fair and balanced job of making sure industry is compliant with laws and regulations while protecting our environment as well as the health of our communities and our families for generations to come.”
Rivero pointed to specific challenges on this front that are particularly unique to Texas.
“Other states are trying to compete for our investments through the regulatory process,” he said. “We have greenhouse gas permitting that is just now going back to the state, where other states have a very streamlined process. We have permitting processes in general that can often be delayed and are often abused.”
Rivero also recognized challenges to the environment due to an expanding populace currently seeking jobs being created by Texas’ economic growth.
“Policy-wise, I think the industry is embracing conservation and renewed energy,” he said. “Our industry uses a lot of water. We do not consume a lot of water, but it takes a lot of water in our processes. We need to make sure this water is available for these businesses to be able to operate.”
Discussion at the legislative level is continuing regarding the desalinization of water, including brackish water, ground water and seawater, Rivero said. “The state is exploring what can be done with desalinization as a viable option in the future,” he said.
Griffin noted a group of industry leaders from China recently visiting the Port of Houston commented on how clean the port’s water is. “It was very nice to hear that,” he said.
“Our industry is a green industry,” Griffin continued. “Our products that go into the automotive industry allow cars to operate at better fuel economy. Our products produce safe, clean water. I’m proud to be part of this industry.”
EHCMA partners have invested more than $5 billion in the past 10 years to drive improvements in air quality, Monette added.
Supporting infrastructure, avoiding complacency
Transportation infrastructure, Rivero said, is also key to maintaining Texas’ and the country’s economic health.
“We need to make sure we’ve got the roads in place to bring new development from the Eagle Ford and the Barnett shales and get product to the customers,” he said. “We need to make sure we have a good rail infrastructure so we can get product and commodities in and out, and shippers are treated fairly and competitively. And then we need to make sure pipelines can be put in safely and without impeding too much on the personal property rights of owners.”
Griffin noted three of the 15 most freight-congested freeways in the U.S. are in Texas’ Harris Country. “In this business we have to have the infrastructure to move forward, and that’s not just the water infrastructure,” he said.
“We need the port, we need good rail and we need good roads,” Skarke added. “We need to be able to move our products very efficiently and very easily from our region here in the U.S. to all over the world.”
“There is a lot of excitement in our industry,” Rivero said. “There is a lot of opportunity, and business is good.”
The biggest challenge to the petrochemical industry, Rivero summarized, is complacency.
“Five to 10 years ago, there was not a plant manager who would tell me they would see a whole lot of new capital investment put in place in Texas,” he said. “We have a unique opportunity. Let’s not take it for granted.”
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