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Industry: Dawn of a new day
Dawn of a new day
Whether it’s a push for renewable energy or net-zero emissions, experts are confident Louisiana’s petrochemical sector will evolve, adapt and thrive. BY SAM BARNES
THERE’S NO DISPUTING that Louisianans are resilient. The last couple of years have shown that much at least. But will they be able to respond and adapt to an industrial market that is likely to undergo some rather radical changes in the coming decades?
No one can reliably predict what the market might look like 40 years from now, says Mark Finley, an energy and global oil expert at Rice University’s Baker Institute in Houston. But that doesn’t mean they shouldn’t try.
“The starting point of any discussion must be to acknowledge how uncertain the future is,” Finley adds, “then to consider those policies and business plans that can succeed in a lot of different scenarios or have the flexibility to adapt.”
Finley says that looking 40 years down the road is a tricky proposition. That’s why most companies examine a variety of possible scenarios, with different outcomes based upon the performance of different variables. Any such scenario begins with some basic assumptions about future economic growth, technology, governmental policy and consumer behavior.
“The reason there’s so many companies doing it is because they’re considering multibillion-dollar investments in plants that are going to have economic lives measured in decades,” he adds.
Most current scenarios predict that climate policies are going to become an increasingly relevant factor, whether that be through renewable forms of energy, the electrification of processes, carbon capture or other similar measures.
But that doesn’t mean that fossil fuels will disappear. In its Annual Energy Outlook 2022, the U.S. Energy Information Administration predicts petroleum and natural gas will remain the most consumed sources of energy in the U.S. through 2050, even though renewable energy will be the fastest growing. Furthermore, U.S. oil production will reach record highs, while natural gas production will increasingly be driven by natural gas exports.
In nearly every scenario a reliance upon renewables will continue to grow, but there’s another commonality—a continuing need to invest in oil and gas.
“The average decline rate of oil and gas production around the world is faster than the most aggressive scenario for reducing oil demand,” Finley says. “In other words, no matter what demand does, we must continue to invest in oil and gas supply to meet demand.”
David Dismukes, executive director of LSU’s Center for Energy Studies, says the likelihood is high that petrochemicals, oil and gas will remain major forces in Louisiana 40 years from now.
“It’s hard to envision a scenario where that’s not the case,” Dismukes says. “As the world stands now, and likely will stand over the next two decades or so, there is no replacement for fossil fuels. No substitute will be able to meet the demand for fertilizers, food, energy, transportation, etc. We’re just not going to get there without fossil fuels.”
Even in the most aggressive scenario, Rice’s Finley says, demand holds steady for oil and petrochemicals. That’s because oil is much more than a source of energy.
“How will you replace petrochemicals as a basic building block of modern life? How are you going to replace all the plastics in food packaging, the medical industry, etc.? The reality is that even in the more aggressive scenarios most people think there’s a significant role to play in petrochemical feedstocks.”
Mark Zappi, executive director of the Energy Institute of Louisiana at UL Lafayette, says the energy and petrochemical industries are inseparably tied, and while the industrial market will undoubtedly look very different 40 years from now “you’re still going to see a lot of our people employed in facilities that make things. I think a lot of it will be fueled by solar and hydrogen, but I wouldn’t be shocked to see natural gas and crude oil still being a major part of this economy.”
No matter what happens, he adds, Louisiana has a global reputation of resiliency, whether in the aftermath of a hurricane, oil spill or economic downturn, “and that resiliency is going to be our biggest strength.”
Even though a forecast recently published by Princeton University predicted that Louisiana would be the worst economic performer through 2050, Zappi feels it grossly underestimated the state’s ability to transition to new industries.
“The switch to hydrogen, for example … if we can get large enough volumes and can store it, that flip is not going to be particularly hard for Louisiana industry,” he adds. “They also
DON’T BURY FOSSIL FUELS JUST YET
• Petroleum and natural gas remain the most-consumed sources of energy in the United States through 2050, but renewable energy is the fastest growing. • Wind and solar incentives, along with falling technology costs, support robust competition with natural gas for electricity generation, while the shares of coal and nuclear power decrease in the U.S. electricity mix. • U.S. crude oil production reaches record highs, while natural gas production is increasingly driven by natural gas exports.
Source: Annual Energy Outlook 2022 / U.S. Energy Information Administration
discounted the impact of offshore wind, which I think is going to be big once we get past some hurdles.
“I think we’re going to come out of this just fine. With our ports and transportation infrastructure, we’re the perfect state to lead many of these transitions.”
CHANGE IS ON THE WAY
Even as political forces swing the regulatory pendulum back and forth, the progression toward a changing industrial landscape will continue to move forward. Most of the change will be in renewable forms of energy and bio-based feedstocks for the petrochemical industry.
Regardless, industry will be the primary driver of change, not government, says LSU’s Dismukes.
“There are just so many things happening outside of politics that are driving this, particularly in finance,” Dismukes says. “The financial community looks at this from a risk exposure perspective, and they want to minimize the risk of returns on their investments.
“What politicians say on the left or the right really doesn’t matter. The markets don’t need incentives to pursue renewable energy. Many of them have already made these commitments to their investors and they don’t take those commitments lightly. In fact, the market is way out ahead of the mandates. We do more at the state level than any mandate says we should be doing.”
There are some real-world examples that show change is happening quickly. Tim Harris, site manager at Eastman Taminco in St. Gabriel, says terms such as “circular economy” and “molecular recycling” have become buzzwords at his company. Achieving net-zero emissions is a corporate goal for Eastman, and locally that means pursuing sustainably sourced raw materials.
“We’re actively engaged in trying to figure out how to do that,” Harris says. Nutrien’s green ammonia operation and Air Products’ green hydrogen plant will both impact his plant, as they are major suppliers.
Energy reduction is another goal.
“We have a group in our corporate office looking at that, because we can’t get to net-zero without that being one aspect of it,” Harris says. “Solar is on the table, and I know they’re looking at others.
“I definitely see industry going in that direction. A lot of my colleagues at ExxonMobil, Dow, etc. have projects in place or have announced plans to get to netzero by 2050. That’s most everyone’s goal.”
Still, ULL’s Zappi says transitioning from carbon-based fuels will be an immense technical challenge.
“It’s not going to happen tomorrow,” he says. “Everybody is still getting in their cars and still flying, and our number one source of fuel is carbon based. That’s not going to change dramatically fast.
“The biggest question is what can technology enable us to do and do affordably? Nevertheless, I feel if we don’t do this in Louisiana somebody else is going to do it for us. We have to move toward change.”
PIVOTING FOR THE FUTURE
Tommy Faucheux, president of the Louisiana Mid-Continent Oil & Gas Association, feels it won’t take 40 years to see significant change in the industrial space.
“I think it’s going to look different five years from now, honestly,” Faucheux says.
What excites him most is the drive to a lower carbon future. “All of my members are talking about reducing carbon emissions,” he says. “They’re not going to stop producing oil and gas, but they’re going to find ways to reduce carbon emissions in the process. But at the same time, they’re becoming the leaders in investing in renewables and new technology.”
Future investments in the energy industry, he says, will likely include a mix of oil and gas production, LNG exports and carbon capture and sequestration.
“All of that provides revenue to the state and creates jobs,” Faucheux says. “Will those jobs look different? That’s quite possible, but I think when you look out over the next several years, if Louisiana plays its cards right, we can build on our energy expertise and lead the nation in lower carbon energy and new technology.”
The policy piece of the puzzle, he adds, will determine the degree in which Louisiana will benefit from the changes.
“As we go through this energy transition, we’re going to need state regulatory help for Louisiana to become the leader that it’s capable of being,” Faucheux says. “It’s going to take a partnership between industry and state government policymakers.”
That partnership extends to academia as well. Seeking to proactively stay ahead of the training curve, River Parishes Community College is using a $1.49 million Delta Regional Authority grant from the U.S. Department of Labor expressly for renewable energy training. Co-sponsored by GNO Inc. and Associated Builders and Contractors’ Pelican and Bayou chapters, the DRA investment assists RPCC in providing training opportunities for jobs in hydrogen, solar and wind energy, primarily through a new process
POWERED BY PETROLEUM
While renewables grows fastest, it will remain far below petroleum and natural gas in 2050 50 2021
History Projections
Energy consumption by fuel (quadrillion BTUs) 40 30 20 10 Petroleum and other liquids Natural gas Coal Other renewable energy Nuclear Hydro 0 Liquid biofuels 1990 2000 2010 2020 2030 2040 2050
NOTE: Biofuels are shown separately and included in petroleum and other liquids.
SOURCE: Annual Energy Outlook 2022 / U.S. Energy Information Administration
equipment training plant at the school’s Gonzales campus.
RPCC commissioned the PET plant in July. Quintin Taylor, interim chancellor at RPCC, says the project has been years in the making.
“The college is poised to be a major player in this space,” Taylor says. “We’re focusing on clean energies, job creation and will initially be focused on renewable energy sources, including solar, wind, geothermal and eventually biomass and biowaste and hydroelectrical processes.”
Ultimately, RPPC will have the ability to train students as wind and/or solar technicians, in addition to providing a variety of other opportunities in renewables. It’s also purchasing training equipment for solar technician training to support new solar farms in the area, as well as equipment for the offshore wind farm initiative in the Gulf of Mexico. The portfolio will also include electrolysis training in support of efforts by CF Industries and others to produce green ammonia.
“By working with industry, we’re ensuring that we move at the pace of business and that we’re aligned in lockstep with them as they reimagine what they’re operations will be,” Taylor says.
Jay Gross, applied sciences department chair at RPCC and PET plant director, says industrial partners communicate their future needs and assist with the development of curriculum through RPCC’s advisory committee, which meets every other month. That conversation often goes out five years and beyond and produces some very real results.
“We’re in constant contact with them,” Gross says. “We have a lot of lines of communication with our partners that we work with. There was a huge collaboration in building our PET plant between LCTCS, RPPC and our industry partners to get this done.
“We’re in discussions about green ammonia, blue hydrogen
CHANGING TIMES: Tim Harris, site manager at Eastman Taminco in St. Gabriel, says a corporate goal is achieving net-zero emissions, meaning the facility is looking for sustainably sourced raw materials.
and solar. Those are getting to be big items in our part of the world, so we’re talking about that now. They’re on the horizon, we can see it and we’re working toward helping with curriculum so we can train operators to do the best job they can.”
Regardless, RPPC’s Taylor says, “there will always be a need for human capital to get the work done.
