The shale gas revolution and its impact on the Dutch chemical industry
Increasing competition requires industry and government response
The recent influx of shale gas from the U.S. is putting the Dutch chemical industry at a disadvantage. Currently the industry generates 79.000 direct jobs and more than 400.000 indirect jobs. The Risk of underinvestment and cluster disintegration arises. Policy measures are needed to reinforce the 2030-2050 strategy.
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The shale gas revolution and its impact on the chemical industry in the Netherlands:
- The chemical industry is a major contributor to the Dutch economy;
- U.S. shale gas puts the Dutch chemical industry at a disadvantage;
- Risk of underinvestment and cluster disintegration;
- the industry needs policy measures to reinforce the 2030-2050 strategy.
Our publication ‘The shale gas revolution and its impact on the chemical industry in the Netherlands’ is an addendum to the long term vision for the chemical industry in the Netherlands which we published recently in collaboration with VNCI, the Dutch chemical industry association.
The ‘Abundant Energy’ scenario assumes wide availability of cheap gas, geothermal energy and solar energy. Considering the increasing abundance of unconventional hydrocarbons in North America, this scenario is likely to unfold. However, an uneven distribution of the benefits is equally likely. Shale gas and shale oil emerge as today’s new energy sources. As they are mainly produced in the US and Canada, this puts Europe and East Asia at a serious disadvantage.
The chemical industry is a major contributor to the Dutch economy
With 60 billion euros in annual revenues, 8 percent of national output, and hundreds of thousands of direct and indirect jobs, the chemical sector is one of two world leading manufacturing clusters in the Netherlands.
Risk of underinvestment and cluster disintegration
As a result of the increase in gas production in the U.S., the spot price of gas in the U.S. has plummeted. In sharp contrast, prices in Europe have risen. This development translates into a huge advantage in feedstock and energy cost for the U.S. chemical industry and to significant capacity expansion in the ethylene (C2), ammonia and chlorine and caustic soda chains. This will harm Europe’s competitive position, unless global demand grows ahead of world capacity or oil prices drop in relation to gas prices.
Policy measures needed to reinforce the 2030-2050 strategy
More competition than anticipated necessitates a response by the industry itself and by policy makers. For the industry, this means a stronger emphasis on all four of the VNCI’s strategic objectives.Industry strategies must be supported by short term policies that allow the industry to weather the storm.