Your web browser is out of date. Update your browser for more security,
speed and the best experience on this site.
You have successfully subscribed to the newsletter!
01 11, 2012 by Greater Baton Rouge Business Report
In geographic terms, Louisiana sits at the mouth of the Mississippi River, a downstream state. But in industrial parlance, the opposite is true: Louisiana is a plentiful source of raw goods, which are often sent elsewhere for downstream processing.
The term “downstream” refers to later steps in a product's cultivation, such as refining and processing. Louisiana has long been known for its abundance of raw materials, though historically it has not been a hub for manufacturing those materials.
But state and regional officials say that trend is changing in a variety of sectors as manufacturers increasingly see Louisiana as an ideal site for finishing the job.
“It's a complex story to describe the different relationships between where things are made and where the raw materials are made,” says Adam Knapp, president/CEO of the Baton Rouge Area Chamber, adding that different regions become known for particular assets, such as the heavy manufacturing base in the Rust Belt and the energy industry in south Louisiana. “You'll have strengths that make you strong for certain sectors, not others.”
Over time, those reputations solidify, which can potentially limit where companies seek to establish operations. Knapp says states can suffer from the same mind-set when looking to attract business.
“If you weren't competitive for decades for various reasons, you may have missed opportunities that you could have gone after,” he says. “Today we are much more competitive to go after those types of things.”
Stephen Moret, secretary of Louisiana Economic Development, says the state has made a concerted effort in recent years to draw more downstream industry. LED formed a business-retention and exploratory group in 2008 that he says works with companies currently in the state to develop new opportunities.
“We have hundreds of meetings per year,” Moret says.
To attract all-new business into Louisiana, LED has made a push in marketing and trade publications nationwide, touting the state's strengths.
“Three big trends are working in our favor: stable natural gas prices, a shift in manufacturing back from China as manufacturers realize that costs are moving into parity, and the image of Louisiana is moving up,” he says, adding that tax incentives and other pro-business initiatives have helped propel the state's reputation nationwide and worldwide.
“We've had some good success stories,” Moret says.
Colorado-based Sundrop Fuels agreed in November to build a $450 million biofuels plant near Alexandria, a deal Moret credits to the state's outreach effort. He also cited such facilities as the Zagis USA textile mill in Lacassine and the ConAgra sweet potato plant in Delhi. In Baton Rouge, more expansive development in films and video games is on the rise.
“Films have been producing in Baton Rouge, but now they're doing more post-production there as well,” Moret says.
Additionally, companies such as Gameloft and Electronic Arts are expanding into more video game creation in the city, he says.
Downstream plants are of particular interest to one of Louisiana's most prevalent and thriving sectors, the chemical industry. Recent trends could lead to a boom in such facilities, says Richard Metcalf, coordinator of refining issues for the Louisiana Mid-Continent Oil and Gas Association.
“Ten years ago, they were being shut down,” he says. “Now they're talking about building them.” He credits the trend in part to the increased exploration of shale for natural gas. “A price of $3.25 at wellhead spurs a great rush for chemical development,” he says.
Metcalf cites the gas-to-liquids complex currently under development in Calcasieu Parish by the South African energy firm Sasol. The plant, which will be built in two phases between 2013 and 2018, is expected to employ 850 people at an average salary of $89,000 and generate 4,000 indirect jobs. It would be the first GTL facility built in the United States. Sasol is also conducting a feasibility study for possible construction of a $3.5 billion-$4.5 billion ethylene cracker and derivatives complex in Calcasieu Parish. Moret says ethylene crackers as well as methanol and ammonia production constitute Louisiana's largest chemical sectors.
New pipelines connecting the Haynesville Shale to 150 end-use markets in the Mississippi River corridor will allow the Baton Rouge area access to the surging north Louisiana natural gas play.
“It means jobs and more money from property taxes,” Metcalf says. “It makes us competitive. … We've got the river, the infrastructure, the plays, horizontal drilling and the tax incentives.”
Knapp says Baton Rouge's location, along the Mississippi River and the Intracoastal Waterway, is a major bargaining chip.
“Our advantage of having major international shipping access makes south Louisiana and the Baton Rouge area very competitive for things [other] areas can't compete for,” he says.
Knapp says the chemical sector has particular benefits for Louisiana's economy because it is less subject to volatile market whims.
“Consumer manufacturing can be dramatically affected by swings in the market,” he says. “The manufacturers here—primarily chemicals—tend to be more stable and predictable over the long term.”
The same cannot always be said for the petrochemical sector, where Metcalf is less optimistic about the growth of new downstream plants.
“Refineries are roughly averaging 85%-90% capacity in the U.S. right now because the economy is low,” he says. “A new, grassroots refinery would take three to five years to develop. … I don't see new refineries being built.” Metcalf says that existing refineries are attractive to buyers because “they're inexpensive and they're there.”
Moret says LED is working with BRAC to compile a database of properties to help the state pitch its assets. Such an inventory would allow the state to better tailor properties to companies' needs, he says, and also to speed up transaction times. With the increased demand, the need to identify properties has become paramount.
“Four years ago, the challenge was getting companies to look at Louisiana,” Moret says. “Now we don't have enough development-ready sites. We have lost some [prospects] in the past because of this. … The worst thing is to have to say, ‘We have no place for you,'” he says.
LED is also employing GIS mapping technologies to discover new sites.
“Ultimately, we want to make sure we're offering a competitive and attractive environment,” Moret says. “We're creating a foundation.”
Sep 30, 2021 | LMOGA
Aug 25, 2021 | LMOGA
Aug 11, 2021 | LMOGA
Jun 18, 2021 | LMOGA