Movin' Out: An Australian Dedicated to American Values, Andrew Liveris, the CEO of Dow Chemical, Has Been Shifting Plants Overseas as U.S. Natural Gas Prices Make Domestic Manufacturing Uncompetitive

By Liveris, Andrew | The American (Washington, DC), May-June 2007 | Go to article overview

Movin' Out: An Australian Dedicated to American Values, Andrew Liveris, the CEO of Dow Chemical, Has Been Shifting Plants Overseas as U.S. Natural Gas Prices Make Domestic Manufacturing Uncompetitive


Liveris, Andrew, The American (Washington, DC)


SINCE 2004, ANDREW LIVERIS has been chief executive officer of the Dow Chemical Company, the giant chemicals and plastics manufacturer with $49 billion in revenues and 43,000 employees around the world. Dow, founded in 1897 in Midland, Michigan, and still headquartered there, seems the quintessentially Middle-American company, but Liveris is the fifth of the past six Dow CEOs to be born outside the United States--in his case, in Darwin, in Australia's remote Northern Territory. He received his engineering degree from the University of Queensland, joined Dow in Melbourne in 1976, and spent much of his career in Asia. He and his wife Paula have three children.

Under his stewardship, Dow has moved vast manufacturing operations overseas--a development about which Liveris is not entirely sanguine.

THE AMERICAN: Andrew, will the chemical industry continue to be a vital part of the American economy?

Andrew Liveris: Petrochemistry, which is an industry based on chemicals that are made from oil and gas, will increasingly diminish its footprint because of America's lack of competitiveness in natural gas, particularly. Our industry used to be the second-largest exporter of American goods outside aviation and aerospace. But that disappeared, and U.S. petrochemistry as an export sector will not exist again, unless natural gas goes below what is notionally the world price.

Why have gas prices gone up so much? Is there something that public policy can do to change that?

Natural gas has gone up because of the deregulation of the electricity sector in the Clinton era. The law of unintended consequences took over. With an Environmental Protection Agency that was fairly aggressive on coal, and with nuclear becoming taboo, fundamentally all new power stations were built with natural gas firing the boilers and turbines. At the same time, domestic natural gas production in the United States was limited. Most of the new areas that were promising in terms of natural gas were in so-called environmentally sensitive areas such as the northwest shelf of Alaska, the Colorado Rockies, and, in particular, the Outer Continental Shelf.

What policy changes could help? Clearly, allowing states to opt in and allow drilling in their waters on the Outer Continental Shelf and to find a mechanism to share revenue with the federal government. That is really the policy of choice. If we can make available the natural gas reserves that the country already has, it will impact not only American chemistry but the American manufacturing economy in a very positive way.

So, with these domestic prices, the chemical industry is not building new plants in the United States?

We are not building the plants that have the biggest economic impact and the most jobs. We are building small, specialty plants. A good example is a plant making water purification units in Minneapolis. That is a $25 million investment. We are also building a plant that makes the precursor for paint in Louisiana for $50 million.

But the plants you are referring to are multibillion-dollar plants. There are over 80 of these under construction around the world right now, and only one, and maybe not even that one--it is not a sure thing--is being built in the U.S.

How much does Dow spend today on natural gas compared to a few years ago?

In 2002, we spent $8 billion for our hydrocarbon purchases. That number in 2006 was $22 billion.

Your costs have nearly tripled even though you are moving some of your operations outside the United States?

Yes. We are moving into joint ventures that now do the buying on long-term fixed-price contracts at fractions of the price that we, the 100-percent company, buy them for in the United States. …

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