Its not news that the Shale Revolution has the potential to bring the Glory Days back to the US Chemical Industry. – IF the industry doesn’t kill a cyclical AND secular opportunity by overbuilding domestic capacity. There are almost dozen mega (billion pound or more) expansion projects in the planning stages, but this has been the case for over a year. Company managements claim that permitted/sanctioned projects can still meet 2016-2018 schedules, but it certainly looks like the number which will break ground during 2014 might be 1 – with 36 months to startup. Meanwhile, every time I look, there seems to be MORE ethane – with supply winning a race to the bottom against possible over expansion. Yes, there are plans to export ethane, following the spate of propane facilities on line this year. But it’s not nearly as easy
Add in the likelihood of a red hot E&C cycle (Tudor, Pickering, and Holt predicts 10%+ annual project inflation over a multi-year timeframe), and its hard not to believe that managements, already burdened by Clean Air issues at the permitting stage, are also fearful of significant cost overruns. (We will present return scenarios shortly). The bottom line, from this chair, is that the coming project cycle, while inevitable, is unlikely to be on time, on budget, or Economically Justified for All.
w many projects can justify