Louisiana’s petrochemical industry is in a renaissance period due to low natural gas prices and major discoveries, including northwest Louisiana’s Haynesville Shale, a chemical industry executive said Wednesday.
Dan Borné, president of the Louisiana Chemical Association and the Louisiana Chemical Industry Alliance, told the Rotary Club of Baton Rouge that the industry was in perilous times just five years ago.
The price of natural gas, a fuel and feedstock for the chemical industry, was high. Many ammonia plants had shut down and Louisiana chemical plants along the Mississippi River and Interstate 10 corridor from Baton Rouge to New Orleans had cut back. Chemical companies found it more advantageous to open and expand overseas.
Employment in the industry had fallen from 34,000 in 1999 to 24,000 only 10 years later.
“We were really in a pickle,” Borné said. “We weren’t really sure where we were gonna end up.”
But Borné credited “the magic of the marketplace,” in the form of falling natural gas prices and development of the Haynesville Shale for bringing the good times back.
Borné said that because the chemical industry uses natural gas the way a bakery uses flour — for everything it makes, essentially — Louisiana’s industry is at its strongest when the price of oil per barrel is seven times the price of natural gas per million British thermal units.
Today, gas is roughly $3 per MMBTUs, while oil is about $90 per barrel — about a 30-to-1 ratio.
“That makes Louisiana incredibly competitive,” he said.
Borné said there is a lot of activity in the chemical industry, which has added 1,000 jobs a year for the last three years. He said Methanex is going to dismantle a methanol plant in Chile and move it to Geismar and is considering another facility in Geismar.
He said Cornerstone Chemical is doing a $30 million feasibility study on building an $800 million ammonia plant in Jefferson Parish.
Even the railroad is expanding in the state — in particular, Union Pacific is laying track.
“When they start laying track, they’re betting on a strong economy,” Borné said.
The industry is going to need thousands of construction workers for expansions and new plants.
“This is an exciting time for our industry,” he said.
But Borné warned that competition remains stiff from China, Malaysia and other Asian nations, not to mention other states like Texas, Pennsylvania, Ohio and West Virginia, which are developing shale plays of their own.
He said fair, consistent regulation; a less litigious legal climate; strong infrastructure; and a well-prepared workforce are keys to competing.