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As petrochemical companies launch new operations to take advantage of North America’s shale gas, they need to be aware of the challenges encountered in capital projects. The approaches that companies use to meet those challenges can have a sizable impact on the ultimate success—and on long-term profits and competitiveness.
Over the next four years (2014-2017), more than $425 billion in new petrochemical plant investments are expected around the globe—and a substantial portion of these will occur in North America. The reason: The abundance of shale gas and shale gas liquids in the region and the resulting stability in long-term natural gas prices have created a cost advantage for the industry in North America.
According to the American Chemistry Council, 148 US-based projects—totaling about $100 billion in potential chemicals capital investment—were announced in early 2014. Many global and regional producers have initiated studies or plans to build ethylene, gas-to-liquid and ammonia plants, as well as NGL export terminals, LNG export terminals and other gas-based chemical and derivative manufacturing plants in North America.
The capital projects referenced in this report are a vital part of North American petrochemical companies’ growth strategies, and they represent tremendous opportunity for the industry. But planning and executing these projects can be difficult—and the cost of delays and disruptions can be high. Indeed, problems with capital projects can have a significant impact on growth plans.
Fortunately, experience and research within petrochemicals and across other chemicals industries provide insight into the critical challenges that capital projects typically encounter—and point to some fundamental principles and practices that companies can adopt to help ensure that their capital projects run smoothly.
As petrochemical companies launch new operations to take advantage of North America’s shale gas, they need to be aware of the challenges often encountered in capital projects. Those challenges are significant—and in some ways growing, as project size and complexity increases. The approaches that companies use to meet those challenges can have a sizable impact on the project’s ultimate success—and on the company’s long-term profits and competitiveness.
Experience and research have shown where the most common pitfalls lie in pursuing capital projects—and there are clear steps that companies can take to avoid them. Understanding and addressing these key challenges can help companies reduce risk and achieve value with their large projects—and ultimately, grow in the North American market.
Fred VitaleSenior Manager, Sourcing and Procurement practice and Global Capital Project Services
Matthew SmithManaging Director, Energy
Steve MeansManaging Director, Capital Projects Services
June 3, 2014
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