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Louisiana’s Unconventional Plays: Economic Opportunities, Policy Challenges
LMOGA 2012 Annual MeetingNew Orleans, LAJanuary 26, 2012
David E. Dismukes, Ph.D.C t f E St di
y ,
Center for Energy StudiesLouisiana State University
Center for Energy Studies
Center for Energy Studies
Rig MovementsRig Movements
2© LSU Center for Energy Studies
Center for Energy Studies
D ti d I t ti l Ri C t
Rig Movements
Domestic and International Rig Counts
Recent changes in crude oil prices are leading to a rebound in overall U.S. rig count from 2008‐2009 recession.
200
250
250
300
0=10
0)Internation
150
200
150
200
anua
ry 2
000
nal Rig C
oun
50
100100
150
Rig
Cou
nt (J
t (January 20
0
50
0
50
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
U.S
. 000=100)
U.S. Europe Middle East and Africa Asia Pacific Latin America
3Source: Baker Hughes.
Center for Energy Studies
D ti Ri C t C d Oil N t l G
Rig Movements
Domestic Rig Count – Crude Oil vs. Natural Gas
However, for the first time in 16 years, the number of oil rigs is equivalent to gas rigs.
80%
90%
100%
60%
70%
80%
Tota
l Rig
s
Gas Rigs
30%
40%
50%
Per
cent
of
Oil Rigs
0%
10%
20%Oil Rigs
4
0%Jul-87 Jul-90 Jul-93 Jul-96 Jul-99 Jul-02 Jul-05 Jul-08 Jul-11
Source: Baker Hughes.
Center for Energy Studies
Supply ImplicationsSupply Implications
5© LSU Center for Energy Studies
U S C d Oil P d R d P d ti
Center for Energy Studies Supply Implications
U.S. Crude Oil Proved Reserves and Production
Crude oil reserves holding steady between 22 to 20 BBbls since 1995.DWRRA (1995) helped reverse a deteriorating trend in GOM reserve declines.
s)
3.5
4.0
35
40
Probi
llion
bar
rels
2 0
2.5
3.0
20
25
30
oduction (billR
eser
ves
(
1.0
1.5
2.0
10
15
20 ion barrels)
Deepwater Royalty Relief Act (1995) resulted in 1.6 Bbbls in
reserve growth (1998-2002)
0.0
0.5
0
5
1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009
Source: Energy Information Administration, U.S. Department of Energy 6© LSU Center for Energy Studies
Reserves Production
U S N t l G P d ti d P d R J 2007 t P t
Center for Energy Studies Supply Implications
U.S. Natural Gas Production and Proved Reserves, January 2007 to Present
2006‐2007 reserves growth is the largest in over 30 years. On average, natural gas reserves have been increasing by 5 percent per year since 2000
25
30
250
300
g y p p y(except 2004‐2005 tropical season, 2 percent).
20
25
200
250
es (T
cf)P
roduc
10
15
100
150
Res
erve
tion (Tcf)
Proved gas reserves at 272.5 Tcf, their
highest level.
0
5
0
50
1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009
Reserves Production
Source: Energy Information Administration, U.S. Department of Energy. 7© LSU Center for Energy Studies
Center for Energy Studies
Policy Issue 1:N t l G UNatural Gas Uses
8© LSU Center for Energy Studies
P t ti l NGV U
Center for Energy Studies Natural Gas Uses
Potential NGV Usage
45
The large potential size of NGV market has a number of competing end‐use categories (i.e., chemicals, manufacturing) concerned.
Displaceable Market Volume: 61 6 Bcfe/d35
40
45
(Bcf
/d)
Displaceable Market Volume: 61.6 Bcfe/d
20
25
30
onsu
mpt
ion
(
10
15
20
atur
al G
as C
o
0
5
Light Duty Heavy Duty Medium Marine Rail Upstream
Na
9© LSU Center for Energy StudiesSource: Data and forecast from EIA, Encana, 2010Displacement opportunities exclude Air, International Shipping, Military, Pipeline Fuel
g y y yDuty
p
NGV Use Categories
N t l G C ti b S t
Center for Energy Studies Natural Gas Uses
Natural Gas Consumption by Sector
Currently, NGVs account for less than 0.18 percent of U.S. natural gas consumption, but the rate of growth in consumption (158 percent) over the past
30
35
8
9
Tcf)
decade has surpassed all other end‐uses.
20
25
30
5
6
7
nsum
ptio
n (T N
GV
Cons
10
15
2
3
4
5
tura
l Gas
Co um
ption (Bcf
-
5
-
1
2
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Nat
f)
10© LSU Center for Energy Studies
Residential Commercial Industrial Electric Power NGV
Source: Energy Information Administration, U.S. Department of Energy
R t il G li P i d N t l G GGE
Center for Energy Studies Natural Gas Uses
Retail Gasoline Prices and Natural Gas GGE
Basic economics, primarily lower relative prices, have played an important role in driving recent increases in natural gas vehicle use.
$3.50
$4.00
$2.00
$2.50
$3.00
Gal
lon
$1.00
$1.50$ pe
r
$0.00
$0.50
Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11
11© LSU Center for Energy StudiesSource: Energy Information Administration, U.S. Department of Energy
Gasoline Natural Gas (GGE)
L di St t i NGV P f
Center for Energy Studies Natural Gas Uses
Leading States in NGV Preferences
Many of these same states also have generous incentive programs that range from additional tax incentives, to infrastructure grant support. Federal benefits include alternative fuel infrastructure tax credit an excise alternative fuel tax credit and analternative fuel infrastructure tax credit, an excise alternative fuel tax credit and an
alternative fuel tax exemption.
Alternative fuel tax credits and/or infrastructure development credits
12© LSU Center for Energy StudiesSource: U.S. Department of Energy
p
Alternative fuel use and infrastructure grant support
P t ti l N t l G C ti NGV
Center for Energy Studies Natural Gas Uses
Potential Natural Gas Consumption – NGV
NGV consumption of natural gas is estimated to increase at an average annual rate of 7 percent through 2035 At best this usage will be considerably less than 1 Tcf
0.70%0.18
f)
of 7 percent through 2035. At best, this usage will be considerably less than 1 Tcfand slightly over one‐half of one percent of total natural gas market.
N
0 40%
0.50%
0.60%
0 10
0.12
0.14
0.16
sum
ptio
n (T
cfN
GV
ConsumNGV use of natural
0.20%
0.30%
0.40%
0 04
0.06
0.08
0.10
ral G
as C
ons
mption (%
of T
gas will stay below one percent of total U.S. natural gas consumption.
0.00%
0.10%
0.00
0.02
0.04
2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034
Nat
urTotal)
13© LSU Center for Energy Studies
Consumption Percent of Total
Source: Energy Information Administration, U.S. Department of Energy
U S P G ti F l Mi
Center for Energy Studies Natural Gas Uses
U.S. Power Generation – Fuel Mix
Over 250,000 MWs of natural gas power generation capacity has been added over the past decade at the expense of coal and nuclear.
Petroleum Other Other Petroleum
2000 2010
Petroleum3%
Other1% 1% 1%
Renewables 9% Renewables 10%
Coal51%
Natural Gas16% Coal
45%Nuclear
19%
Nuclear20%
Natural Gas24%
14© LSU Center for Energy StudiesSource: Energy Information Administration, U.S. Department of Energy
Center for Energy Studies
El t i I d t E i t l R l ti C t U t i t f C lElectric Industry Environmental Regulations Create Uncertainty for Coal
National Ambient Air Quality Standards (NAAQS)• Sets acceptable levels for six criteria pollutants (carbon monoxide, lead, nitrogen dioxide, particulate matter, ozone,
lf di id )sulfur dioxide).• A network of 4,000 State and Local Air Monitoring Stations is used to determine if geographic areas are meeting or
exceeding the NAAQS.
Transport Rule (now CSAPR) [proposed]p ( ) [p p ]• Issued to replace the Clean Air Interstate Rule (CAIR) and its predecessor the Clean Air Transport Rule (“CATR”).
Requires 31 states (and D.C.) to improve air quality by reducing power plant emissions (SO2 and NOX) that contribute to ozone and fine particulate pollution in other states (some annual, some on ozone season only).
• By 2014, the rule and other state and EPA actions would reduce power plant SO2 emissions by 80% over 2005 levels. Power plant NOx emissions would drop by 58%.
Utility Maximum Achievable Control Technology (MACT) [to be proposed]• EPA must set emission limits for hazardous air pollutants. The rule is expected to replace the Clean Air Mercury Rule
(CAMR) and add standards for lead, arsenic, acid gases, dioxins and furans.
Coal Combustion Residuals (CCR) [proposed]• Would establish, for the first time under the Resource Conservation and Recovery Act (RCRA) requirements for the
proper disposal of coal ash generated by coal combustion at electric power plants.
Power Plant Cooling Water Intake Structures RulePower Plant Cooling Water Intake Structures Rule• Section 316(b) of the Clean Water Act is intended to address environmental impacts from cooling water intake to and
discharge from power plant cooling systems. Requires that the location, design, construction and capacity of cooling water intake structures reflect the best technology available for minimizing adverse environmental impact.
15
Center for Energy Studies
Summary of Retirement Studies Related to EPA RulesSummary of Retirement Studies Related to EPA Rules
Study Retired Capacity Regulation Requirements
Levelized costs (@2008 CF) after retrofitting each unit for the environmental regulations compared to the cost of a new gas-fired unit
80Estimated GW of Retired Coal
10 20 30 40 50 60 70
Scenario 1 - Transport Rule
Scenario 2 - Transport Rule, MACTScenario 3 - Transport Rule, MACT, 316(b) Cooling Water, Coal Ash
Cost of retrofitting coal plant compared to cost of new CC
fired unit.NERC (October 2010)
47 to 76 GW by 2018 (total fossil fuel capacity, including oil and gas)
Scenario 1 - Transport Rule, MACTScenario 2 - Transport Rule, MACT, CWA 316(b)
Regulated Units - 15-year present value of costs > replacement power from a CC or CT. Merchant unit - 15 year present value of cost > revenues from energy
gas CC
B ttl G 50 t 65 GW b
ICF/IEE (May 2010)
25 to 60 GW by 2015
Transport Rule, MACT, 316(b) Cooling Water, Coal Ash
Size and existing controls
Transport Rule, MACT
15-year present value of cost > revenues from energy and capacity markets.
Brattle Group (December 2010)
50 to 65 GW by 2020
Credit Suisse (September 2010) 60 GW
Transport Rule, MACT
Switch to lower sulfur coal, install emission controls, or retire
T t R l MACT
In-house model (NEEMS) optimizing costs of existing capacity and costs of potential new capacity.
MJ Bradley (August 2010) 30 to 40 GW
Charles River Associates (December 2010)
39 GW by 2015
Source: Synapse Energy Economics, Inc., “Public Policy Impacts on Transmission Planning, Prepared for Earthjustice”, December 10, 2010; and “Miller, P. A Primer on Pending Environmental Regulations and their Potential Impacts on Electric System Reliability. Working Draft, JD Northeast States for Coordinated Air Use Management. January 24, 2011.
Transport Rule, MACT
Transport Rule, MACT
FGS + emissions on all coal fired units by 2015Bernstein Research (October 2010)
51 GW
16
P t ti l N t l G C ti N G ti U (R ti d C l)
Center for Energy Studies Natural Gas Uses
Potential Natural Gas Consumption – New Generation Use (Retired Coal)
The retirement of 45 gigawatts of capacity would likely still have only a limited i ll l
2 500
3,000
)
impact on overall natural gas usage.
2,000
2,500
umpt
ion
(Bcf
)
1,000
1,500
al G
as C
onsu
0
500
Nat
ura
17© LSU Center for Energy Studies
NGV New Generation (Retired Coal)
Note: Assumes 160 Bcf of NGV natural gas use. Also assumes retirement of 45 GW of coal-fired capacity, replaced with new natural gas generation with an 85 percent capacity factor and a 7,600 Btu/kWh heat rate.
Center for Energy Studies
Policy Issue 2:LNG d US N t l G E tLNG and US Natural Gas Exports
18© LSU Center for Energy Studies
Center for Energy Studies
Considerable Underutilized LNG Regasification Capacity along GOMConsiderable Underutilized LNG Regasification Capacity along GOM
A
Existing
JFRegasification O
T
B
ExistingExistingA. Everett, MA: 1.035 BcfdB. Cove Point, MD: 1.8 BcfdC. Elba Island, GA: 1.6 Bcfd (+0.5 Expansion)D. Lake Charles, LA: 2.1 Bcfd
Under ConstructionApproved
Liquefaction
Q
SB
E. Energy Bridge, GOM: 0.5 BcfdF. Northeast Gateway, Offshore MA: 0.8 BcfdG. Freeport, TX: 1.5 Bcfd (+2.5 Expansion)H. Sabine, LA: 4.0 BcfdI. Hackberry, LA: 1.8 Bcfd (+0.85 Expansion)J N t Off h MA 0 4 B fd
Existing
Liquefaction
Under Construction
Approved
C
J. Neptune, Offshore MA: 0.4 BcfdK. Sabine Pass, TX: 1.0 Bcfd (+ 1.0 Expansion)Under ConstructionL. Pascagoula, MS: 1.0 BcfdApprovedM Corpus Christi TX: 1 0 Bcfd
Approved
C
D
M. Corpus Christi, TX: 1.0 BcfdN. Corpus Christi, TX: 2.6 BcfdO. Fall River, MA: 0.8 BcfdP. Port Arthur, TX: 3.0 BcfdQ. Logan, NJ: 1.2 BcfdR. Port Lavaca, TX: 1.0 Bcfd
HIKG
L
MN
P
ES. Baltimore, MD: 1.5 BcfdT. LI Sound, NY: 1.0 Bcfd
M R
LNG V l Ch i
Center for Energy Studies Natural Gas Uses
LNG Value Chain
Feedstock (production) costs will be critical in determining the location of basin-specific production along the global LNG supply curve.
Feedgas Liquefaction Shipping & Fuel Regas Delivered Equivalent
Europe:
LowHigh
56%($/MMBtu)
$4.00$6.50
11%-17%($/MMBtu)
$1.25$1.25
20%-29%($/MMBtu)
$1.40$1.65
4%-7%($/MMBtu)
$0.50$0.50
Cost($/MMBtu)
$7.15$9.90
Oil Price*($/BOE)
$41.47$57 42High
Asia:LowHigh
$6.50
$4.00$6.50
$1.25
$1.25$1.25
$1.65
$2.90$3.45
$0.50
$0.50$0.50
$9.90
$8.95$11.70
$57.42
$51.91$67.86
20© LSU Center for Energy StudiesSource: Cheniere.Note: *uses a BOE conversion of 5.8 Mcf/BOE.
Henry Hub: $4.50$5.00
WTI: $97.00
$100.00
Center for Energy Studies
Moti ations for Mo ing Shale Gas to Global Cons ming AreasMotivations for Moving Shale Gas to Global Consuming Areas
Japan LNG U.K. NBP U.S. Henry Hub FSU @ German Border
14
16
18
p y @
• Excess U.S. shale production.
10
12
14
mmbtu
• Growing global energy demand.
4
6
8
$/m
• Climate change issues.
• Global natural
0
2
Jan‐05 Jan‐06 Jan‐07 Jan‐08 Jan‐09 Jan‐10 Jan‐11
Global natural gas price differentials.
21Source: Marathon
B i C titi
Center for Energy Studies Natural Gas Uses
Basin Competition
Close to 6,000 TCF of shale gas opportunities around the world. Coupled with 9,000 Tcfin conventional suggest a potentially solid resource base for many decades.
Canada388 Tcf
China1,275 Tcf
388 Tcf
U.S. 862 Tcf
France180 Tcf
Poland187 Tcf
Al i Lib
Brazil226 Tcf
Mexico681 Tcf
Algeria231 Tcf
Libya290 Tcf
Australia396 TcfSouth
Africa485 T f
Argentina774 Tcf
226 Tcf
Source: MIT Energy Initiative. 22© LSU Center for Energy Studies
485 Tcf
Center for Energy Studies
Policy Issue 3:Drilling-ProductionDrilling Production
Challenges & Opportunities
23© LSU Center for Energy Studies
Ri C t d C d Oil P i (E h St t M d R l ti t 1999 A ti it )
Center for Energy Studies Drilling Challenges & Opportunities
Rig Count and Crude Oil Price, (Each State Measured Relative to 1999 Activity)
$141 200
North Louisiana has been the shining opportunity in the industry during the recent price downturn/correction. However, that competitive advantage is starting to deteriorate.
$10
$12
$14
1,000
1,200
999
= 10
0)H
e
$6
$8
$10
600
800
t (Ja
nuar
y 19
enry Hub ($/M
$2
$4
200
400
Rig
Cou
ntM
cf)
$00 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11
N Louisiana Texas Pennsylvania New MexicoN. Louisiana Texas Pennsylvania New Mexico
Oklahoma Wyoming Natural Gas Price
Source: Baker Hughes; and Federal Reserve Bank of St. Louis. 24© LSU Center for Energy Studies
A l P d ti U ti l R (Ch i )
Center for Energy Studies Drilling Challenges & Opportunities
Annual Production, Unconventional Resources (Cheniere)
Liquids production from shale plays > 3 million barrels per day by 2020 Associated natural gas > 7 Bcf/d of “costless” supply
Bcf/d MMB/d8 4.0
Includes Eagle Ford W Barnett Bakken Shales; GraniteIncludes Eagle Ford W Barnett Bakken Shales; Granite
g pp y
5
6
7
2.5
3.0
3.5Includes Eagle Ford, W. Barnett, Bakken Shales; Granite
Wash, Piceance & Uinta Tight SandsIncludes Eagle Ford, W. Barnett, Bakken Shales; Granite
Wash, Piceance & Uinta Tight Sands
Liquids
3
4
5
1.5
2.0
2.5Gas
0
1
2
0
0.5
1.0
25© LSU Center for Energy StudiesSource: Advanced Resource Intl; presentation to Cheniere Board, March 2011; Cheniere Research
0
2010 2011E 2012E 2013E 2014E 2015E 2020E0
Center for Energy Studies
Th N t F ti C d Oil Sh l
Drilling Challenges & Opportunities
The Next Frontier: Crude Oil Shales
• Number of i demerging crude
oil shale plays that could have dynamic impact
i d ton industry.
• As much as 24 billion barrels i l hin plays such as Monterey (CA), Bakken(ND), Eagle Ford (TX) andFord (TX), and Niabrara(CO/NE).
26© LSU Center for Energy StudiesSource: Energy Information Administration.
Center for Energy Studies
C d Oil Sh l O t iti L i i
Drilling Challenges & Opportunities
Crude Oil Shale Opportunities -- Louisiana
• 1998 LGS Study primary publicly-available source of yinformation on the formation.
• Lies between sands of the upper and lower Tuscaloosa.
• Varies in thickness from 500 feet (MS) to around 800 feet (LA).
• Shallowest opportunity around 10,000 feet – mostly between 11,000 to 12,000 –some areas as deep as 16,000 (EBR).
• Estimated potential resource
27© LSU Center for Energy StudiesSource: Oil and Gas Journal and Louisiana Geological Survey.
of 7 BBbls.
Center for Energy Studies
U it d St t E l t (2005 100)
Drilling Challenges & Opportunities
United States Employment (2005 = 100)
150Oil and gas employment
140
0)
Total emplyoment
120
130
ent (
2005
= 1
00
110
Empl
oym
e
90
100
28© LSU Center for Energy Studies
902005 2006 2007 2008 2009 2010 2011
Source: Bureau of Labor Statistics
Center for Energy Studies
U S /Sh l P d i St t E l t (2005 100)
Drilling Challenges & Opportunities
U.S./Shale Producing State Employment (2005 = 100)
108
104
106
0)
102
ent (
2005
= 1
00
98
100
Empl
oym
e
94
96 States with major shale activity
Rest of U.S.
29© LSU Center for Energy Studies
942005 2006 2007 2008 2009 2010 2011
Shale states: LA, TX, AR, ND, UT, CO, & PASource: Bureau of Labor Statistics
Center for Energy Studies
Oil d G I d t E l t (2005 100)
Drilling Challenges & Opportunities
Oil and Gas Industry Employment (2005 = 100)
450
500Louisiana TexasA k N th D k t
350
400
450
0)
Arkansas North DakotaUtah ColoradoPennsylvania North Dakota
250
300
ent (
2005
= 1
00
150
200
Empl
oym
e
0
50
100
30© LSU Center for Energy Studies
02005 2006 2007 2008 2009 2010 2011
Shale states: LA, TX, AR, ND, UT, CO, & PA
Source: Bureau of Labor Statistics
Center for Energy Studies
C ti d Sh l D l t Ch ll
Drilling Challenges & Opportunities
Continued Shale Development Challenges
Still a number of lingering issues that create challenges for all shaleStill a number of lingering issues that create challenges for all shale development:
• Public challenges on true resource size.
• Water/aquifer contamination issues.
• Water usage issues.
• Other environmental issues (geological emissions)• Other environmental issues (geological, emissions)
• Regulatory/tax changes
• Supporting infrastructure development.
• Market demand and price support.
31© LSU Center for Energy Studies
Center for Energy Studies
Policy Issue 4: Other New End-Uses d I d t i l R iand Industrial Renaissance
32© LSU Center for Energy Studies
L i i Sh l F ilit t d E l t
Center for Energy Studies Industrial Growth Opportunities
Louisiana Shale-Facilitated Employment
A $5.4 BILLION investment in expanded ethylene production capacity in Louisiana will
In Louisiana, more than 35,000 permanent jobs will be created in the chemical
More than $2.3 BILLION in wages will go into the pockets of Louisiana p y
generate a total of $10.9BILLION in additional chemical industry output, bringing the state’s industry revenues to $56.9 BILLIONand maintaining it as the country’s
d
industry and throughout the supply chain in everything from trade and craft jobs to highly-skilled knowledge workers.
pworkers, generating $399
MILLION in state tax revenue and nearly $440 MILLION in federal revenue.
2nd largest chemical producing state.
INVESTMENT PHASE(building the facility)
OPERATION PHASE(ongoing production)
33© LSU Center for Energy StudiesSource: American Chemistry Council
E i I t f Additi l Eth Utili ti
Center for Energy Studies Industrial Growth Opportunities
Economic Impact of Additional Ethane Utilization
Economic Impact fromExpanded Production of Petrochemical Economic Impact from
Impact Type Employment Payroll Output Employment Payroll Output
Expanded Production of Petrochemicaland Derivatives from a 25 Percent
Increase in Ethane Production
--- (Billion $) --- --- (Billion $) ---
Economic Impact from New Investment in
Plant and Equipment
Direct Effect 17,017 2.4$ 32.8$ 54,094 4.3$ 16.2$ Indirect Effect 79,870 6.6$ 36.9$ 74,479 5.1$ 16.8$ Induced Effect 85,563 4.1$ 13.7$ 100,549 4.8$ 16.1$
Total Effect 182,450 13.1$ 83.4$ 229,122 14.2$ 49.1$Total Effect 182,450 13.1$ 83.4$ 229,122 14.2$ 49.1$
34
R t E i A t
Center for Energy Studies Industrial Growth Opportunities
Recent Expansion Announcements
Sep-2011: Williams announced an expansion at its Geismar olefins production facility (Baton Rouge, LA). The expansion will increase the facility’s ethylene production by 600 million pounds per year to a new annual capacity of 1.95 billion pounds and is expected to be in service by the third quarter of 2013.p y p p y q
Apr-2011: Dow announced plans to increase its ethylene and propylene production, and to integrate its US operations into feedstock opportunities available from increasing supplies of US shale gas. Specifically, the Company plans to increase its ethylene supply and cracking capabilities at existing Gulf Coast facilities by:• Re-starting an ethylene cracker at its St. Charles operations site near Hahnville, LA by the end of 2012;• Improving ethane feedstock flexibility for an ethylene cracker at its Plaquemine, LA site in 2014;• Increasing ethane feedstock flexibility for an ethylene cracker at the Freeport, TX site in 2016;• Constructing a new, world-scale ethylene production plant in the US Gulf Coast, for startup in 2017.
Apr-2011: Westlake Chemical Corporation announced an expansion program to increase the ethane-based ethylene capacity at Lake Charles, LA, and the evaluation of expansion options and the upgrade of ethylene production facilities at Calvert City, KY in order to capitalize on new low cost ethane and other "light" feedstocksbeing developed.
Mar-2011: Chevron Phillips Chemical announced it is advancing a feasibility study to construct a “world-scale” ethane cracker and ethylene derivatives at one of its existing facilities in the Gulf Coast region. The new facility would utilize the advantaged feed sources expected from development of shale gas reserves.
35
Dec-2010: Sasol announced plans to construct the world’s first commercial tetramerization unit, capable of producing over 100,000 metric tons per year of combined 1-octene and 1-hexene, at its existing Lake Charles, LA Chemical Complex.
Center for Energy Studies
ConclusionsConclusions
36© LSU Center for Energy Studies
Center for Energy Studies
C l i
Conclusions
Conclusions
• Exceptional industry performance: employment up; reserves up; production up; investment/capacity up; and exports up.production up; investment/capacity up; and exports up.
• Traditional sectors of energy industry have proven they are high technology, high capital, and high growth – you’d have a hard time figuring that out watching the nightly news.that out watching the nightly news.
• Policy and perception continue to be things that plague continued industry development. It is hard to imagine the development and innovation that could arise if the current policy uncertainty were removed.could arise if the current policy uncertainty were removed.
• There are a large number of new domestic end-uses: many are likely to arise over the next several years and many have simply been take away by policy (not economics).policy (not economics).
• Policy uncertainty is the biggest impediment to continued development. Significant short-term policy retrenchment on unconventional resources could lead to economic impacts that would pale in comparison to past
37© LSU Center for Energy Studies
could lead to economic impacts that would pale in comparison to past financial and housing crisis.