It is a pleasure to be here in Japan to address this year’s Asia Petrochemical Industry Conference.
APIC is one of the most important annual meetings, providing us a chance to come together, share ideas and discuss the outlook for the industry. Today, that outlook remains positive. Our industry continues to grow at rates higher than general economic growth. But even more important, chemistry and chemical products are playing a critical role in society by improving standards of living and raising millions out of poverty all over the world.
For these reasons, I am as optimistic about the chemical industry now as I have been in all of my 33 years with ExxonMobil. I believe that we are witnessing a new golden age for chemicals manufacturing and innovation.
Today, I want to briefly discuss why this growth in chemicals is occurring, the important role that chemicals have in advancing societies around the world, and the responsibilities that role puts on us, the industry leaders, today and in the future.
Let’s start with examining the demand outlook for our products. Demand for energy and chemicals remains robust, and we expect continued growth in the decades ahead.
An obvious driver of this demand growth is population. Over the next quarter century, the global population is forecasted to grow from about 7 billion today to approximately 9 billion.
But, perhaps the more important factor to growth will be increases in living standards. As the world’s population grows, the world also becomes more prosperous. According to research by the Brookings Institution, the global middle class is expected to more than double by 2030. This is good news. It means longer, healthier and better lives for billions of people.
As incomes in the developing world increase, more and more people will have access to consumer goods, automobiles and appliances. From smartphones to air conditioners, all of these things take energy, and they are built from chemicals.
ExxonMobil estimates that global demand for chemicals will rise by nearly 45 percent over the next decade alone, or about 4 percent a year. That’s more than the forecasts for energy and GDP growth over the same period.
Nearly all of this growth will occur in the developing world, with two-thirds coming from the Asia-Pacific region. We expect that India and China will each reach more than 1 billion middle-class citizens by 2040.
The industry is responding to these demographic trends by expanding investments across the value chain.
As we have witnessed throughout our industry’s history, much of the investment in manufacturing is occurring where the demand is – today, that’s in the Asia-Pacific region.
But we are also seeing companies seize on opportunities close to affordable and abundant feedstock supplies. The current situation in the United States is playing out similarly to what occurred in the Middle East decades ago, when the region emerged as a low-cost supplier due to competitive feedstock. As a result of the shale gas revolution, that feedstock advantage is shifting toward the U.S., where companies, including ExxonMobil, have announced a wave of capacity expansions to serve growth overseas.
Thanks to industry advances in hydraulic fracturing, U.S. natural gas production has increased by about 40 percent over the last decade, and natural gas reserves are up approximately 50 percent. The shale revolution has sparked a manufacturing renaissance, particularly for chemicals. According the American Chemistry Council, the U.S. chemical investments linked to shale gas have reached over $160 billion.
Even at sustained low energy prices, the United States’ abundance of unconventional resources will provide opportunities for the most competitive chemical producers to make attractive investments serving markets across the world.
At the other end of the value chain, the industry is responding to changes driven by our customers, most notably the desire for more sustainable solutions. Now more than ever, consumers worldwide are looking for affordable, sustainable and safe products that they can trust for their families. Today’s consumers are also conscious of preserving the earth and its resources for future generations to enjoy.
Society’s aspirations to protect the planet and its people are reflected in the United Nations Sustainable Development Goals. The new goals, announced in 2015, include ending poverty, ending hunger, supporting economic growth, promoting clean water and sanitation, building sustainable cities and communities, and taking action on climate change.
Our industry is playing a key role in meeting all of these challenges. Chemicals help provide for the safe production and distribution of food and water. We are producing materials for pharmaceutical medicines and devices that are contributing to healthier communities. And when it comes to climate change, we are providing solutions for society to reduce overall emissions and giving our customers choices to help them reduce their own environmental footprint.
I want to highlight a few specific examples of how our industry is contributing to the world’s economic and sustainability goals.
When it comes to feeding the world, our industry has long provided farmers with essential fertilizers to boost nutrients and dramatically increase yields, along with chemical compounds to eradicate diseases that can negatively impact our food supply.
Now, plastics are helping advance agriculture for the 21st century while helping consumers address 21st century concerns about the environment and climate risks. For example, new polyethylene films are used to further increase crop yields – up to 60 percent in some cases. These films improve moisture retention, control weeds and manage temperatures to enable longer growing seasons and increase overall efficiency.
Once food is cultivated, our products help it reach grocery shelves efficiently and effectively. Sadly, one-third of the food produced for human consumption today is lost or wasted, at an estimated cost of $750 billion dollars annually. Chemicals can help address this problem with plastic packaging that can preserve food for longer and reduce spoilage. Undoubtedly, food preservation will be key to feeding the additional 2 billion people that we expect on the planet by the next quarter century.
The greatest potential for plastic packaging is here in Asia. As populations grow more affluent and increasingly urban, shoppers are leaving outdoor markets for grocery stores, where packaging is vital for preservation.
Plastic packaging is also helping save energy and reduce global emissions. Advanced plastic packaging reduces total product weight and enables more products per shipment – this translates into fewer trucks on the road, which of course results in less energy used, and ultimately fewer greenhouse gas emissions. A study conducted for the American Chemistry Council estimates that the environmental cost of using plastic in consumer goods and packaging is nearly four times less when compared with alternatives.
Another way the industry is reducing emissions is through vehicle efficiency. Plastic auto parts match the strength and safety of traditional materials, but at a fraction of the weight. According to the U.S. Department of Energy, every 10 percent of vehicle weight reduction means about a 7 percent gain in fuel economy. These are significant fuel savings – especially when you consider that we expect to more than double the cars on the world’s roads by 2040.
In addition to more vehicles, a growing global middle class will also mean more buildings – more homes, hospitals and workplaces. Chemicals can help meet construction needs by producing building materials that are more energy-efficient, durable and better performing. From roofing to flooring, water pipes to window seals, house wraps to insulation, plastics can deliver energy savings and last longer than traditional materials.
These are just a few examples of the many sustainable solutions provided across our industry. Together, we are making great strides in meeting society’s dual challenge: supporting economic development and human progress while at the same time improving sustainability and reducing environmental threats like climate change.
In fact, a 2009 study by McKinsey & Company found that for every unit of greenhouse gases emitted by the chemical industry, society saves more than two units through use of the products that we manufacture. In other words, our products save more than twice the emissions than are emitted when making them. That ratio stands to grow even greater with increased investment and innovation.
But we must remember that with success comes many responsibilities.
Sustainability is not just about the products we make; it’s also about how we make them.
Responsible production starts with being a good neighbor and respecting the environment and human rights in the communities in which we operate. As manufacturing expands into new areas, investments must not only serve business interests; they should also contribute to local development and community needs. Our industry is growing at a rapid pace, but we must never sacrifice integrity for the sake of expediency. That means doing the right thing, the right way, every time.
We must also take action to reduce the environmental footprint of our operations. We have already made significant progress in this area through the use of advanced energy-efficiency technologies and techniques like cogeneration. At ExxonMobil, our chemicals business has reduced its net greenhouse gas emissions intensity by 9 percent since 2013. We have also reduced the energy intensity of our manufacturing operations by 4 percent over the past decade. Other companies in the industry have achieved similar success. We can build on this progress through sustained investment and innovation.
But, there are other responsibilities that extend well beyond our facilities, including doing our part to reduce the negative impacts from the products we produce. The challenges of waste management will continue to increase and we, the chemical manufacturers, must play a leadership role in identifying long-term solutions.
As we reviewed earlier, plastics are a sustainable solution that enable us to do more with less. In many cases, we can enhance plastics’ benefits by recycling them after use. We all agree that plastics are valuable; they should not be buried in a landfill or end up in our oceans.
We must work with the public, governments and other organizations to drive the recycling and reuse of these products. The chemical industry supports a number of projects worldwide to reduce waste and marine litter, but there is still much more work to be done. Plastic waste is becoming a critical issue for societies, and identifying solutions needs to remain a priority for our industry.
As industry leaders, we also hold a responsibility in education. It is incumbent upon us to educate consumers about the health and safety of our products and their choices with respect to sustainability. Our products make modern life possible, and they are vital to economic growth, social progress and environmental management. It’s our job to tell this good story.
In addition, we must work to educate policymakers and other key stakeholders on practical, risk-based product management. The recent success of modernizing the Toxic Substances Control Act in the U.S. was a monumental achievement on this front, and it represents the kind of progress that is possible when industry, government and NGOs work together toward constructive improvements. Our challenge now is to ensure that this new law is implemented through a risk-based approach, using the best available science.
Yet, all over the world, we must continue to advocate for balanced regulations that enhance consumer and marketplace confidence. Through the Strategic Approach to International Chemicals Management and other global initiatives, our industry and its stakeholders can work together to improve chemical management and achieve better outcomes for our communities.
It is a great time to be in the petrochemical industry. Global demand is strong and growing. New innovations are contributing to increased global prosperity and sustainability. And we are playing an active role in meeting some of the world’s most complex economic and environmental challenges.
At ExxonMobil, we are responding to this positive outlook and proud to be playing a major part in the industry’s global expansion.
Capitalizing on the U.S. shale revolution and the resulting supplies of competitive feedstock and energy, ExxonMobil recently announced plans to invest $20 billion into manufacturing facilities along the U.S. Gulf Coast. The majority of this new capacity will be for the production of performance polyethylene, targeted for export to the growth regions of Asia, Africa and Latin America.
ExxonMobil is also growing its manufacturing presence here in Asia to keep pace with growing demands and evolving customer needs. We recently completed a multibillion dollar expansion of our chemical complex in Singapore, which doubled the size of its finished product capacity.
We are further upgrading our Singapore specialty products by adding halobutyl rubber and adhesive resin manufacturing facilities, which are scheduled to be completed with start-up in the second half of this year. And earlier this month, we reached an agreement to acquire the assets of Jurong Aromatics Corporation in Singapore. These facilities present strategic product and logistical synergies for ExxonMobil’s integrated refining and petrochemicals complex.
To better serve our customers in the Asia-Pacific region, we have also embarked on an expansion of ExxonMobil’s Shanghai Technology Center. This includes a new, state-of-the-art research and development facility to support customer collaboration and growth. Partnering with our customers is key to developing the next generation of innovative, affordable and sustainable products.
In addition to these announced investments, ExxonMobil is responding to changes and challenges through enhanced collaboration with industry associations. Initiatives like the Responsible Care program are helping drive continuous improvements in health, safety and sustainability.
The American Chemistry Council is also developing an improved set of principles to help guide our industry’s collective sustainability efforts. These include promoting the safe use of chemical products, reducing pollutants and greenhouse gas emissions, and conserving materials and resources.
As part of this sustainability initiative, members are renewing their commitment to providing scientific information on chemical impacts, creating a framework for transparent decision-making, and collaborating with stakeholders to support sound regulatory policies.
All of us share the same goals with respect to sustainability, and we each bring different strengths and perspectives to the table. Further cooperation and enhanced accountability can drive continued progress.
As an industry, we have much to be proud of and a bright future ahead. But securing this brighter future will require continued innovation and collaboration and a commitment to upholding the important industry responsibilities I have outlined today.
Chemistry is already advancing societies and changing the world for the better, and we have the potential to make an even greater impact in the decades ahead. I believe the best is still yet to come. Thank you.