Our Views: A delta鈥檚 discontents
http://theadvocate.com/news/opinion/11506135-123/our-views-a-deltas-discontents
For the foreseeable future, although not forever, we鈥檙e going to hear a lot about 鈥渢he delta,鈥 and it won鈥檛 be referring to a river鈥檚 outlets, the usual meaning of the phrase.
It will be the gap between the price of oil and the value of natural gas, the latter for several years dramatically cheaper than in the past. That鈥檚 an important point because so much of Louisiana鈥檚 vast complex of petrochemical manufacturers use natural gas as a feedstock for operations 鈥 gas is not just a fuel for energy production.
In those boom years, billions in new projects were announced for Louisiana, as the delta between oil and natural gas was larger. The poster child was the Sasol plant near Lake Charles, which was to be the largest industrial investment in Louisiana history.
The state is still seeing a substantial benefit from the low price of natural gas from Sasol, a South Africa-based energy giant. The company鈥檚 Westlake complex is going ahead with an $8.1 billion ethane cracker.
But the $14 billion gas-to-liquids project at the Westlake facility is on hold, as the delta shrinks in world energy markets. Turning natural gas into other fuels is not such a profitable proposition.
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That could change. And it is not as if the price of natural gas continues to benefit Louisiana. Just south of Lake Charles, on the Calcasieu Ship Channel, a company is seeking permits to build a $2 billion facility for exporting liquefied natural gas.
It is one of several in the southwestern part of the state, and the smaller in terms of capital investment.
These are big projects, employing thousands in construction. And the companies building them are protecting themselves against natural gas price increases: They typically back the borrowing for the huge facilities by signing long-term contracts for delivery of LNG to customers in Japan or elsewhere.
So watching the delta does not tell the full story about the energy business in Louisiana, but it is obviously a concern if multi-billion-dollar investments are on hold.
