Summers in a Pennsylvania steel mill might seem like an unlikely place to find the future president of the American Fuel & Petrochemical Manufacturers association, but that’s where Charlie Drevna got his start. Now, it seems prescient as energy and manufacturing become ever more closely linked in the US.
When Drevna was working the mills, they were manufacturing drill pipe for oil and gas production in Oklahoma and other parts of the country where conventional hydrocarbon resources were being produced in volumes that many expected were in terminal decline.
“The good news is we are having a debate about exporting US natural gas, five to seven years ago we could not have that debate because [the US] was perceived as energy poor. New technology has produced a bounty of oil and gas,” he recently told Breaking Energy.
The AFPM, formerly known as the National Petrochemical & Refiners Association recently changed its name to better reflect the fact that their members are really manufacturers. Although refiners and petrochemical companies do not make finished products that typically appear on store shelves, they do produce the building blocks required to make many of those products.
One of the issues the AFPM faces today is the US LNG export debate and the view held by many of its members that such exports would raise the price of natural gas and natural gas liquids here in the US. These are the feedstocks that fuel the production of plastics, chemicals and many other widely used materials.
When asked about AFPM’s view of this issue, Drevna stressed the industry group is a “free market organization.” While he understands why certain companies are against natural gas exports, the AFPM are market proponents.
“There is no reason to prohibit gasoline exports any more than there is to prohibit the export of washing machines,” said Drevna.
Referring to a petrochemical complex Shell has proposed constructing outside of Pittsburgh; Drevna said “the economic boom for the region [the facility would create] cannot be understated.” Read more about that project here.
There has been some question about whether the current natural gas production explosion taking place in the US generates more economic activity at the upstream – exploration and production level – or the downstream – refining and marketing level. The upstream benefits include direct drilling jobs, supply chain jobs and ancillary services like local hotels and restaurants that are thriving in producing regions. Downstream, cheap feedstock boosts refining and petrochemical economics.
“The petrochemical industry wants NGLs and the Marcellus shale formation is blessed with lots of liquids,” said Drevna.
The late 1990’s saw a wave of consolidation pass over the oil and gas business, with Exxon and Mobil tying up, Chevron and Texaco merging and BP teaming with Amoco and Arco, among other M&A activity. More recently the sector has seen oil companies spin off their less profitable refining businesses.
“Refining is getting spun off from integrateds now, but it’s a cyclical business. Look at any industry – railroads, airlines, cement, etc. – and you will see similar cycles. As the world becomes global, companies need the wherewithal to remain competitive.” Drevna said.
The long-term trajectory of US natural gas prices is extremely unpredictable – Drevna would not make any price forecasts – but a structural shift below historical average levels would bode well for his constituency. Though Drevna would not make a prediction, he certainly hopes natural gas prices remain low. After all, his business card is made of plastic.