Downstream ’19: Industry mulls weight of supply chain, economic and trade issues

The downstream industry is starting its biggest conference at a time of continued worries about the supply chain and logistics, economic growth, trade tensions, technology breakthroughs and project management challenges.

It's a lot to contemplate during the Downstream 2019 conference which started on Tuesday and continues on Wednesday.

The U.S. chemical industry is set to grow this year notwithstanding a challenging world economy – according to the newly released “Mid-Year 2019 Chemical Industry Situation and Outlook” by the American Chemistry Council (ACC). Growth is expected to be spurred by strength across major chemical end-use markets and significant shale gas-linked investment on capacity expansion.

However, the industry faces headwinds from slowing global growth, escalating trade tensions and a slowdown in manufacturing and chemical exports.

With slowing growth prospects across much of the globe and rising trade tensions, chemical exports are not performing as well as expected a year ago. Manufacturing also appears to be slowing. On the plus side, chemical inventories are in a more balanced position, housing is expected to ease slightly before continuing its slow recovery, and the automotive sector will stay at relatively elevated levels. Both are important end-use markets for chemistry.

“During 2019, performance among individual chemical segments will be mixed,” the Outlook states. “Output gains will be strongest in organic chemicals, inorganic chemicals and other specialty chemicals. Production of agricultural chemicals and consumer products will fall slightly before recovering in 2020.”

Rising business investment will continue to drive U.S. GDP growth, though at slower rates than the previous two years. Growth in consumer spending, while moderating, is also making a positive contribution. GDP is projected to rise by 2.5 percent in 2019, 1.9 percent in 2020 and 1.8 percent in 2021. The chemical industry will be source of strength, with growth of 2.5 percent in 2019 and 3.0 percent in 2020. In fact, chemical industry growth will exceed that of the U.S. economy through 2024.

“The United States remains an attractive destination for chemical industry investment,” the Outlook notes. “Since 2010, petrochemical producers have announced significant expansions of capacity in the U.S., reversing a decades-long decline.”

To date, 334 chemical and plastics projects cumulatively valued at $204 billion have been announced, with 53% of the investment completed or underway and 40% in the planning phase. America’s plentiful and affordable supplies of natural gas and NGLs – a key feedstock for chemical makers in the U.S. – are driving the new investment. Further gains in capital spending are anticipated, increasing by 5.4% t this year and 4.9% in 2020. Capital spending will reach $43 billion by 2024.

Houston, Texas is the largest petrochemical manufacturing producer in the world, and at least 30% of the projects are taking place there.

Infrastructure improvements to keep up with the growth have not moved quick enough, especially in key markets such as the Houston Port Region.

A committee made up of experts from the downstream industry, the Port, local cities, Harris County and Texas Department of Transportation have identified 30 specific freight related projects to help efficiently move good through the region, Chad Burke, President Economic Alliance Port Houston said.

The U.S. chemical industry trade surplus continues to grow, but potential expansion is limited by reduced external demand due to slower global growth and rising trade barriers. The U.S. chemical industry will post a $37 billion trade surplus in chemicals this year as exports rise 5.9% to $149 billion and imports rise 2.4% to $112 billion, the ACC said. Two-way trade between the U.S. and its foreign partners will reach $260 billion in 2019, a 4.4% expansion over last year, though trade growth has slowed considerably.

Image: American Chemistry Council

Market surveys reveal the downstream industry lags other sectors in adopting digital technology to boost productivity, but significant capital investment is pushing innovation and changes to education faster than ever before.

While owners look to combine turnarounds with capital projects, and push for lean operations and more data analysis and technology, refinery and maintenance and shutdown turnaround teams have never been so challenged.

Overcoming and solving major engineering, construction, supply chain and workforce challenges are key themes of the Downstream 2019 event.

Day one featured a plenary panel of influential downstream leaders from Wood, Bechtel, KBR and McDermott.

“We need to do better together in this next phase of investment. During phase one, there were gross challenges and few service providers that made money. There was modification of the service provider and inappropriate analysis of risk, said Andrew Stewart, CEO Americas Wood,
“In the Gulf Coast, there was very little adoption of technology advancements because service providers are not making enough money,” Stewart added. “This time we as an industry need more collaboration and more honest conversation about customers.”

A host of the latest product and service innovations across four Exhibition theatres was also offered to showcase new technology.

Countless breakout track specific workshop and panel sessions highlighted day one, covering everything from the best model to integrate capital projects into turnarounds, proof of concept testing to integration into work processes, Blockchain - A Government perspective and working at scale; transferring lessons learned from mega to small-medium capital projects.

Day two of Downstream 2019 kicks off a 9 a.m. on Wednesday June 11, with a special guest address from Marcus Luttrell, former Navy SEAL and author of the best-selling book ‘Lone Survivor’.

Chevron’s President of Manufacturing will offer a keynote on the lessons learned the last five years in downstream safety, workforce development, productivity, project sustainability, logistics and digitalization and how these experiences will have a bearing on the next big projects from Chevron now and in the years to come.

The Downstream 2020 conference will head to NRG Park in Houston on June 10 – 11 next year.

By Heather McGuire Doyle