In an economic landscape shaped by anemic global growth, low oil prices and a strong U.S. dollar, many chemical industry proponents hope that Louisiana’s plant owners will focus instead on long-term demand variables and move forward with the more than $24 billion in capital investment currently in the queue.
As 10/12 Industry Report details in a feature in the current quarterly issue, four Louisiana parishes in particular—St. James, St. John, Calcasieu and Ascension—have the most to gain from projects announced since 2012, since more than 80% of the projects in the FEED (front-end engineering and design) stage are located there.
Economist Loren Scott of Loren C. Scott & Associates says the primary reason the chemical industry is “tapping the brakes” continues to be low natural gas prices in Europe and China. Since overseas natural gas prices move in tandem with oil prices, unlike in the U.S., the falling price of oil has made these countries more price competitive. Natural gas is not only a popular source for fuel but also a raw material used in a variety of chemical processes.
Many of the planned projects were announced when market conditions were decidedly different, with oil hovering around $100 a barrel and natural gas prices much higher abroad—a formula that makes the U.S. more attractive for investment.
However, in October Scott took a more optimistic tone, pointing to recent increases in the price of oil as an encouraging sign and one that could lead to a widening competitive advantage for Louisiana plants. “OPEC has gotten together to put a cap on the production of oil, and Russia did the same,” he adds. “If these folks really follow through, you are going to see the price of oil drift upwards.”
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