US Chemical Manufacturers’ Group Resists Calls for Limits on LNG Exports: Platts Energy Week
Also: Potential for US Oil Exports; “The Big Picture” on New Energy Infrastructure
Washington - April 30, 2012
The United States' shale gas boom bodes well for domestic chemical manufacturers, which often use natural gas as base feedstock, but some in the chemical industry want to limit US exports of natural gas to keep prices low, the head of the industry's trade group said Sunday on Platts Energy Week, on the all-energy news and talk show program.
Cal Dooley, president and CEO of the American Chemistry Council, said that such restrictions on natural gas exports could end up hurting the industry, if they cause gas developers to cut back on production.
“We place our trust in the marketplace," said Dooley. "We are concerned about putting arbitrary government controls on the restrictions that actually might have an adverse impact on the production of natural gas."
Dooley, a former Democratic member of the US House of Representatives from California, said that at the moment, the supply of domestic natural gas exceeds demand from the chemical industry, as it takes about five years for a new chemical plant to come online. The industry has about $25 billion in new plants planned.
"We're convinced that the supply of natural gas will meet demand," Dooley said. "We're seeing a tidal wave of new investment in chemical manufacturing in the United States, but ... we look at the forces of supply and demand as being the best dictator of how we allocate that."
Dooley's comments differed from those of Dow Chemical CEO Andrew Liveris, who said recently that the US should not allow too much natural gas to be exported, since the industry is counting on U.S. prices staying low.
Liveris said at a conference in Houston earlier this month that if US natural gas prices approach those in Asia or Europe, where they are much higher, chemical manufacturers would have less reason to invest in U.S. plants.
Dooley acknowledged those concerns, saying the industry has a "once in a generation opportunity to capitalize on" the United States' burgeoning natural gas supplies. But he said natural gas prices would have to rise significantly for the US chemical industry to lose its competitive edge against European-based chemical manufacturers.
In the US, about 85% of chemicals are derived from natural gas feedstock, he explained, while European manufacturers rely on oil for 70% of their chemicals.
"Natural gas has a 7-to-1 advantage over the price of oil" for chemical manufacturing, Dooley said. "So that means that when oil was $28 a barrel, if natural gas was $4 [per MMBtu], we'd be at parity, and you'd be indifferent to the sourcing of the feedstock. Right now with oil at $104 a barrel [and] natural gas at $2 [per MMBtu], we're at a 50-to-1 ratio. We see that competitive ratio being sustained for a long period of time."
The likelihood for the US to export oil was also addressed on Sunday’s Platts Energy Week. Adam Bedard, senior director for crude oil and natural gas liquids of analytical firm Bentek Energy, a unit of Platts, outlined this scenario and the findings of a new Bentek report.
In Sunday’s “The Big Picture” segment, Platts Chief Editors Chris Newkumet and Rod Kuckro discussed the emergence of diverse new energy resources, which has triggered a dramatic build-out of energy infrastructure in the United States. Rod and Chris addressed how with that growth comes a long list of new challenges for energy companies, regulators and Wall Street.
In this week’s “Market Spotlight” segment, from London, Richard Swann, Platts editorial director, global oil news, and Tim Worledge, Platts team leader, middle distillates, examine the impact of soaring fuel costs on airlines.
Platts Energy Week airs at 8 a.m. US Eastern time Sunday on WUSA in Washington and at 6:30 a.m. US Central time on Sunday and 7:30 p.m. on Monday on KHOU in Houston. The program is also available on the web at www.plattsenergyweektv.com.
Platts Energy Week airs weekly at 8 a.m. Eastern time on Sunday mornings on W*USA TV 9 in greater Washington, D.C. The program is also available online beginning 9:00 a.m. ET on Sundays at http://www.plattsenergyweektv.com. In greater Houston, The 30-minute program also airs on Sundays in Houston at 4:00 p.m. Central Time on KUHT HoustonPBS, Channel 8.
The program follows an interview format featuring guests from the energy industry Obama administration, Congress, government agencies, think tanks, and the investment community. Host Bill Loveless is the long-time editor of Platts’ Inside Energy and brings nearly three decades of energy journalism experience to the anchor chair.
Platts Energy Week is produced by Platts, the world’s leading source of information and intelligence on energy and related commodities and a division of The McGraw-Hill Companies [NYSE: MHP], and W*USA-TV, the Washington, D.C., CBS affiliate and flagship television station of Gannett Company. [NYSE: GCI]. While the program is US focused and produced in Washington, it reflects the global vantage point of Platts, whose correspondents are stationed in such major capitals as London, Dubai, Singapore, Tokyo and Moscow.
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