Economic Alliance Industry Brief

The “Economic Alliance Industry Brief” column is written by Traci L. Koenig- Director of Economic Development, and contains the latest research and market trends.  It is written with the intention of being a piece to be referenced throughout the quarter as you conduct your business.  It can be found in each edition of our quarterly Newsletter and online.  You may also subscribe to receive a curated digital digest of relevant industry articles at the following address:

2015 Economic Alliance Activity Re-Cap

The Economic Alliance has been hard at work to bring capital investment to the Houston Port Region.

While the market slowed slightly from the huge boom seen between 2011 and 2014, the 2015 numbers are robust compared to every other region in the country.  Texas is the largest chemistry-producing state in the country and the second-largest manufacturing state in the country.[1]

In 2015, the Economic Alliance:

  • Attracted $427 million in capital investment.
  • Supported: 4 major projects, the creation of over 60 direct jobs, the creation of approximately 420 indirect jobs, and the creation of approximately 600 temporary construction jobs.
  • Hosted an unprecedented attendance of over 700 guests at the Gulf Coast Petrochemical & Maritime Outlook Conference (now called the Gulf Coast Outlook Conference).  This year’s conference is now spread over two days.  Mark your calendars for 8/24 – 8/25/2016.

Market Drivers

All around us, we hear talk of the rapidly diminishing rig counts and resultant job cuts in the upstream sector of oil and gas.  We hear of mergers and acquisitions.  We hear of upstream capital projects being delayed or canceled altogether.

The good news?  We aren’t upstream.  We are downstream.  Much of the membership base of the Economic Alliance, while affected indirectly by what happens in the upstream sector, is more readily affected by the price of its natural gas feedstock than by the price of crude oil.

The domestic shale plays, buoyed by innovations in fracking technology, have all but ensured that the price of natural gas will remain low for the foreseeable future.  This is both positive and negative, given the fact that the U.S. is entering the LNG export market.

Domestically, natural gas liquids (NGLs) are the primary feedstock for many of the plastics and resin products our refineries along the Houston Ship Channel produce.  Those plastics are then exported to countries like China to produce consumer goods.  According to the Port of Houston trade statistic data, Plastics are second only to Petroleum & Petroleum Products in the amount of tonnage exported.[2]  They are second only to Machinery in leading export commodities by dollar value.

In 2014, metro Houston had 28.3 percent of the nation’s capacity for polyethylene resins, 31.2 percent of its capacity for polypropylene resins and 34.4 percent of its capacity for polyvinyl chloride resins.[3]

Domestic demand for imported finished commercial goods is increasing rapidly in our region due to population expansion in the Houston MSA.  This demand for imported finished goods means our refineries are producing plastics to be exported (to places like China) and returned to us in the form of imports.  It’s a self-supporting ecosystem in many ways.  However, our resin / plastics- producing refineries may feel the contraction of Chinese demand for their product in the short-term due to China’s internal economic issues.  It will be important for us to foster other export relationships to maintain our growth rate.[4]

Exhibit 1: ICIS Petrochemical Flowchart.

Another burgeoning factor that may play a role in our region’s growth is LNG exports.  The United States has the supplies to become the world’s third-largest LNG exporter after Australia and Qatar.[5]  We simply must identify a consistent market for our supply.  One would think Japan and Europe would be natural markets for our supply now that China’s demand is diminishing, but we are competing head to head with Russian supply to both markets, and Russian LNG is cheaper.  At the time of this writing, the price of importing Russian gas to Europe hovered at $6 per mmBtu and the price of importing US regasified LNG to Europe hovered at  $7.50 per mmBtu.  There’s a differential there, but perhaps one not so great that it outweighs the potential benefit to Europe of having a more geopolitically stable source of LNG supply.  We can hope.

As it stands right now, the U.S. has seven LNG Export terminal projects that are Federal Energy Regulatory Commission (FERC)- approved, six of which are under construction.

Exhibit 2. FERC- Approved Export Terminals. Source: 

Of the six terminals under construction, two of them are in Texas.  The U.S. has an additional 22 proposed projects in some phase of the FERC- approval process, 7 of which are in Texas.

Exhibit 3. Proposed Export Terminal Projects.  Source:

The construction surrounding these new developments will be a boon to the local economies they are located in regardless of how the U.S. fares on the global LNG export market, but we may see some mid-term project delays while the price of LNG stabilizes at a rate that can support additional capital expansion in terminal facilities.  As of 2012, unconventional oil and natural gas development supported 2.1 million jobs in the U.S. and is projected to support 3.9 million jobs by 2025.  LNG exports theoretically could contribute as much as $10 billion to $31 billion per state to the economics of natural gas-producing states like Texas.[6]

Growth Implications

Given all of the above, we are experiencing organic growth in the Houston Ship Channel region in a way not seen in any other region of the Houston MSA, the state, or the country.  It is important to make the distinction between organic growth, which happens as a result of the right climate for it; and externally-driven growth, which happens as a result of some external variable like crude oil prices that vary given the current geopolitical climate.  The organic growth being experienced in the Houston Ship Channel Region is sustainable in the near- term because it is primarily based on low LNG feedstock prices (likely to last until the global market settles on a stable, higher price) and organic regional population growth. The Greater Houston Partnership estimates that the Houston MSA will add 3.4 million additional residents between 2015 and 2040.  That’s over 2,600 people per week on a straight average.[7]

Growth itself is neutral; our reaction to it will determine its value to our region.  The Houston Ship Channel region is experiencing growth to be sure. Our near-term growth is somewhat assured.  Our long-term growth is a given.  How exponential our mid-term growth is will be determined by geopolitics that we can affect only marginally but have an interest in adapting to quickly.  Flexibility in our industry’s cap ex plans and focused infrastructure planning on a regional level will be the keys to coming out on top.


[1] American Chemistry Council. “Chemistry in My State: Texas,” (

[2] Port of Houston Authority.  “Port of Houston Foreign Trade Containerized Cargo Statistics,” (

[3] Greater Houston Partnership. “Chemicals,” ({a45ba3acbba73cdc9d8868db37f310c949be44167a7da7bf3b84f03faeb6b5e8}20W001{a45ba3acbba73cdc9d8868db37f310c949be44167a7da7bf3b84f03faeb6b5e8}20Chemical{a45ba3acbba73cdc9d8868db37f310c949be44167a7da7bf3b84f03faeb6b5e8}20Industry{a45ba3acbba73cdc9d8868db37f310c949be44167a7da7bf3b84f03faeb6b5e8}20Overview.pdf).

[4] Magnier, Mark. “China Growth in Focus as Imports and Exports Fall,” The Wall Street Journal. October 15, 2015 (

[5] Palti-Guzman, Leslie. “Gas Under Pressure: The United States is Ready to Export LNG, but Does the World Want It?” Foreign Affairs Magazine.  January 8, 2016 (

[6] American Petroleum Institute. “Liquefied Natural Gas Exports: America’s Opportunity & Advantage.” May 2015.

[7] Greater Houston Partnership. “Population and Employment Forecast,” ({a45ba3acbba73cdc9d8868db37f310c949be44167a7da7bf3b84f03faeb6b5e8}20W001{a45ba3acbba73cdc9d8868db37f310c949be44167a7da7bf3b84f03faeb6b5e8}20Population{a45ba3acbba73cdc9d8868db37f310c949be44167a7da7bf3b84f03faeb6b5e8}20and{a45ba3acbba73cdc9d8868db37f310c949be44167a7da7bf3b84f03faeb6b5e8}20Employment{a45ba3acbba73cdc9d8868db37f310c949be44167a7da7bf3b84f03faeb6b5e8}20Forecast.pdf).