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Asian players should adapt to new energy realities, says Dow exec

11:43 AM MDT | May 22, 2014 | Natasha Alperowicz

The change in the global energy landscape will profoundly affect Asia’s petrochemical industry, according to Peter Sykes, president Asia/Pacific at Dow Chemical. In his keynote address to the Asia Petrochemical Industry Conference (APIC) at Pattaya, Thailand, today, he urged Asian players to adapt through greater national energy security, shifting toward higher-added-value products, and innovation. Shale gas developments in the United States will majorly change the shape of the world petrochemical industry. By 2018, US chemical industry revenue is predicted to top $1 trillion/year compared with $488 billion in 2008. “One reason for that is the investment flowing into the US to take advantage of new competitive energy costs. We are tracking more than 120 manufacturing investments totaling more than $100 billion,” Sykes says.
 
Four distinct waves of investment will characterize the US expansion, he predicts. The first wave is by upstream industries. “The American Petroleum Institute believes investments could top $5 trillion by 2035 as producers race to keep up with growing demand.” Wave two involves chemicals and steel, among others. US gas prices have fallen to one-third of those in Europe and one-fifth of those in Asia. Ten new ethane crackers have so far been announced in the US, as well as multiple debottlenecking expansions. “We believe it is likely that five to six greenfield crackers will start in the 2017–19 time frame.”
 
The third wave will be by downstream users, building nearby or colocating their projects. “Already one-half of the $100-billion investment is foreign direct investment. This next wave could be even more than that. One projection says that we are quickly reaching a tipping point for industries like computers, electronics, appliances and even furniture. Together, they could add another $80–120 billion in annual output in the Unites States and create as many as 3 million additional jobs,” Sykes says.

A fourth wave involves R&D and tech centers colocating to support a growing manufacturing base. “We at Dow believe that the US investment surge could be bigger than anyone has so far calculated.”
 
Sykes says the impact on the rest of the world will be unprecedented. Companies must come to grips with the new energy reality and work to secure their energy future. Each company must find a way to optimize, increase, and diversify its domestic energy supplies, including investments in cost-effective alternative and renewable energy.
 
“The Asian investment model, which was based on conventional naphtha-based market-price economics, is unlikely to be competitive in the future. The best way to offset cost disadvantage is to deliver to market products it wants—solutions it needs. The market rewards solution providers,” Sykes says. Dow has a large presence in Asia/Pacific, which accounts for 18% of Dow’s global sales. “We are committed to grow our percentage over time,” he says. One example is the long-standing partnership with the Siam Cement Group at Map Ta Phut. This $3.5-billion investment represents Dow’s largest manufacturing presence in Asia/Pacific.
 
“The global energy landscape has changed, and there is no going back. The reality is here, and we must deal with it the best way we can. In many instances, this will involve tough choices. Dow believes it is important to encourage this region to develop clear and balanced energy policies to support continued growth and to shift the focus from basic to tailored solutions. By relying on the power of science and on our people, we can create value,” he says.



Comments (1) for Asian players should adapt to new energy realities, says Dow exec
1.
The growth of innovation for existing olefin and downstream plants in Asia will be outmatched by the falling olefin price in USA. The only way Asian players can survive then, would be to join hands with US out-flux of NG/NGL and olefins and focus on downstream capability building. Because downstream capability building will happen in the 3rd wave according to Peter Sykes.
Posted by Bhagawat Rawat on Monday, May 26, 2014 @ 05:12 AM










 
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