BIZMOLOGY — This week Dow Chemical confirmed site selections for a major plastics expansion initiative, and the company’s decision to build out its facilities in Freeport, Texas, and Plaquemine, Louisiana, should come as no surprise. Dow has comprehensive plans to grow its operations on the Gulf Coast, and it’s not the only chemical company that sees dollar signs in the region.
Drawn by an abundance of affordable natural gas, companies ranging from petrochemical producers to plastics makers are spending billions of dollars to expand manufacturing operations along the Gulf. Domestic production of natural gas has reached unprecedented levels in recent years, due largely to advances in horizontal drilling and fracking techniques that have unlocked US shale reserves that were previously inaccessible. The resulting drop in gas prices has greatly reduced feedstock costs for chemical producers and slashed energy costs for manufacturers of all stripes.
Dow estimates that current manufacturing expansion projects tied directly to shale gas represent nearly $100 billion in new investments, most of which are being made by chemical makers (not to mention the occasional petroleum refiner). Foreign chemical producers, which commonly partner with local operators, are also flocking to the Gulf region. Japan-based Mitsui, for one, recently formed a joint venture with Celanese that will make use of an existing Celanese facility in the Clear Lake area near Houston. Backed by an $800 million investment, the expanded unit will produce methanol, an industrial chemical that’s in high demand, particularly in China.
The petroleum-rich Gulf Coast has long played host to chemical companies, but the current gas boom appears to be a game changer for manufacturing in the region. And the surplus of natural gas has even spawned another Gulf Coast investment opportunity: US LNG exports.