Dow Chemical Canada Inc. alarmed over high natural gas prices

Dow Chemical Canada Inc. alarmed over high natural gas prices
By PATRICK BRETHOUR

Wednesday, March 9, 2005
Updated at 4:30 PM EST

CALGARY — Soaring natural gas prices are gutting Canada’s competitive advantage in petrochemicals and driving high-paying jobs out of the country, the head of this country’s biggest petrochemical company said yesterday.

Ramesh Ramachandran, president of Dow Chemical Canada Inc., delivered a stinging warning to a natural gas conference in Calgary yesterday, saying high prices are wreaking permanent damage on the petrochemical industry.

And in an allusion to the title of the conference — Walking the Tightrope, Supply and Demand in Delicate Balance — the petrochemical executive said his company will not engage in any acrobatics to remain in North America, but will simply shift operations to less costly areas. “Tightrope walking is an act that belongs in circuses.”

Indeed, Mr. Ramachandran said his company is already moving investment to the Middle East, where local governments are using the lure of low commodity prices to build up a petrochemical industry. But North America’s established industry faces a much different picture, as stagnating supplies and escalating demand from new electricity generation, Alberta’s oil sands and other consumers sends prices on an upward spiral.

In earlier decades, ample natural gas supplies had given North America — particularly Alberta — a significant cost advantage over European rivals. But Mr. Ramachandran said that competitive advantage is “almost a historic relic” today.

He criticized the natural gas industry’s complacency over the effect of high prices, saying that if a Dow client faced a similar bind, he would feel compelled to act.

Dow uses an enormous amount of natural gas as a feedstock to create the building block of plastics and other petrochemicals, by its own estimates accounting for 7 per cent of Canada’s consumption.

Mr. Ramachandran said he finds it hard to understand why natural gas liquids are used for electricity rather than much more profitably for petrochemicals, saying the practice is “akin to using a $100 bill to light a candle for dinner.”

© Copyright 2005 Bell Globemedia Publishing Inc. All Rights Reserved.
The Globe And Mail