The petrochemical market of the Gulf Coast

Gulf Coast – The Petrochemical Boom

With all of the talk about the petrochemical market and, specifically, “The Cracker”, it is still a somewhat mysterious concept to many. I reached out to several of my connections in the energy field and no one was really sure what the impact of Royal Dutch Shell’s Ethane Cracker Plant would be.

The U.S. petrochemical industry as a whole was in a slump until recently when shale fracking became prevalent and created an abundant supply of cheap natural gas. With the prevalence of cheap natural gas produced from shale, the U.S. suddenly held an economic advantage over foreign competitors, who largely relied on more expensive oil for their petrochemical operations. In 2014, there was more than $100 billion in Petrochemical manufacturing construction either underway or planned.

In 2016, the economic conditions still exist in regard to cheap natural gas, but the drop in oil prices has hampered some of the competitive advantage that existed. Additionally, many of the companies involved in the planned investments have less cash on hand and have needed to scrap or scale back some of their investments.

The impact of the petrochemical market or industry is largely intertwined with the oil and gas industry because of their shared supply chains and other resource use.  We can see some of the impact that was caused by the recent boom in petrochemicals in the Greater Houston and Greater New Orleans areas where the vast majority of the $100 billion investment was planned.  Although the investment was scaled back, these areas still received the bulk of the money that was actually invested since petrochemical companies typically cluster their plants and related facilities in order to take advantage of shared feedstock (natural gas), byproducts and infrastructure.

Greater Houston – petrochemical market

Texas’s petrochemical industry was spurred by the need for synthetic rubber and chemicals during World War II. By the 1960’s, the Texas Gulf Coast had the world’s largest complex of ethylene production facilities and had begun taking a larger share in the manufacture of products produced from its plants.

Texas’s economic development website listed the average yearly wage of someone in Texas’s refining and chemical manufacturing industry at $95,000.00 and employment of 100,000 workers in Texas’s petrochemical cluster. Houston provides more than 40% of the nation’s base petrochemical capacity.

Even with all of the historical infrastructure in the Gulf Coast, the impact of a new plant can still be felt in the area.  An ExxonMobil facility expansion near Houston was projected to employ about 10,000 construction workers, create 4,000 related jobs in Houston communities, and add 350 permanent positions at the plant.  ExxonMobil expects the facility and related activity to increase regional economic activity by $870 million per year and generate more than $90 million in additional annual tax revenues for local communities.

Greater New Orleans – petrochemical market

At the peak of scheduled investments, over $20 billion in projects were planned along the Mississippi River between New Orleans and Baton Rouge.

South African Company, Sasol broke ground on an $8 billion ethane cracker plant in Lake Charles, Louisiana (near New Orleans) in 2015.  The original project was set to cost up to $20 billion and become part of a 3,300 acre compound that would be so large that it had planned construction of a campus to house 4,000 construction workers in addition to the workers who did not need the temporary housing. Investment in the larger gas to liquids facility that would convert natural gas into diesel and similar fuels was delayed because of low oil prices. The facility still created 500 full-time jobs and 5,000 construction jobs.

The Greater New Orleans Regional Economic Development Website lists planned expansions of refineries and petrochemical plants worth $6.4 billion over the next 2-3 years. These expansions will add to an existing 300 major chemical plants, 23,000 chemical industry jobs and $4.5 billion yearly exports of chemical products.


The petrochemical market and industry is big business. Significant initial investments are required to construct cracker plants. A large portion of the job creation occurs temporarily during construction, but because of the propensity to cluster, new plants can bring about more economic benefit in the form of additional plants and tertiary jobs in manufacturing, maintenance, supply chain and other related industries. As seen with the Gulf Coast, significant employment can result from a market entry of the Petrochemical industry and can last for generations.

Sources: 5

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