Speaker: Theo Walthie, Business Group President, Hydrocabons andEnergy, and Ethylene Oxide/Ethylene Glycol
Event: Eurogas Confernce
Location: Brussels, Belgium
Date: 03/30/2004

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Good afternoon ladies and gentlemen. It is indeed an honor for me to address all of you during this important conference focussed on sustainability of the natural gas industry in an enlarged Europe.

I am here today to speak to you from the vantage point of a major customer and a major industrial partner… one which is focussed on creating a sustainable future… but one deeply concerned about the viability of that goal in the European context.

Sustainability is one word—one word with many interpretations, so I will start by saying that to me, sustainability means a balance… a balance between improving the environment and society as a whole, while creating a competitive, stable economic business climate.

The ability to strike a balance however is contingent on the economic component—without economic fundamentals: an industrial base, jobs, business stability, and a long-term and competitive playing field… the model falls apart. Environmental protection and societal enhancement are not possible without a firm foundation for the economic pillar.

Together We Stand
My presentation is intended to bring “US” together…

• “You” as a supplier, and
• “We” as the chemical industry and one of your major customers …

I want to bring us together on a path to make a “sustainable” future possible. Our past, present and future are intertwined. Intertwined that is, in this ever increasingly complex and competitive global landscape.

My message today…

• Energy intensive industry in Europe is not competitive globally
• EU regulatory & legislative framework has put European industry at risk
• We, collectively must address the issues along with other stakeholders

My friends… creating a sustainable future is not an option. It is an Imperative.

I am proud

• As a representative of the Chemical and Plastics sector, I am proud to say that we are an industry that originated here in Europe:
• With a PROVEN TRACK RECORD of performance and contribution to the pillars of sustainable development
• WE HAVE DELIVERED… on safety, on investment, on job creation, on innovation and new technology which has helped transform our society and our world
• We have proactively IMPROVED our environmental PERFORMANCE… engaged in voluntary agreements, delivered substantially on CO2 reductions and have in fact met Kyoto targets of more than 30% reduction in GHG emissions since 1990.

We deliver
We are an industry that is willing to be tested and held accountable for our performance.
We:

• Strive for a competitive business environment
• Support legislation so long the expectations are clear, fair and support a competitive playing field
• Believe in constructive dialogue
• Believe responsibility for a sustainable future must be shared between stakeholders--equitably
• Support that non-compliance must have consequences
• But insist that results be rewarded

We are an industry that has delivered and wants to deliver… challenge us positively… incentivize investment in technology and new capabilities.

And yet… we are under fire
All that said, our European petrochemical industry finds itself being squeezed:

• Squeezed from the standpoint of increasing costs and operational burden;
• With bodies of regulation and legislation (from Reach to Emissions Trading) progressively distorting competition

We are being squeezed:

• to deliver disproportionate results to make up for shortfalls in other sectors (transportation and
  homes);
• and squeezed as the power sector stands poised to shift their added costs onto their consumers-to us!

On top of this, the promise of Energy Liberalization has not materialized: distribution and storage channels remain limited-and markets are still essentially closed.

EU is running out of own reserves very fast, thereby increasing EU’s import dependency drastically in the coming decades.

The gas for Europe will have to come from abroad and this will require drastic improvements of the “hardware” and “software”: Connections and accessibility via market liberalization must improve at a much faster pace.

All this while we operate in an overall global environment where costs can’t be passed on--and one in which our customers are demanding more for less. We are being squeezed to the point that our competitiveness in the European framework is in danger…

• We are not being recognized for our accomplishments and delivery against targets
• Costs are deterring investment
• And the practical application of Kyoto and EU Emissions Trading is threatening to Further isolate our industry;

So why should you care about the challenges we face? Because my friends we are in this together. Our future will impact yours… our ability to operate in the European context has direct and measurable impact on your future and on the sustainable future of European industry.

If we find ourselves unable to compete in the global arena--the impact will be felt by our employees, by our communities, and by the Member States in which we operate. The impact will be felt by our customers, and our customers’ customers, and THE IMPACT WILL BE FELT BY YOU… our supplier.

We Have An Impact…
We are an industry that originated here in Europe at the end of the 19th century.  The chemicals sector is a $1.7 trillion global system including pharmaceuticals, growing at about 4% annually.  

• This is 4% on a global basis, not from an European perspective.
• By the way: the global gas industry is a $600 billion industry, growing at 2.8%!

The European and global petrochemical industry plays a huge part in enabling almost everything that touches people’s lives around the world:  House hold and personal care products, paints and coatings, paper, carpet, furniture, pharmaceuticals, packaging, food, electronics, construction, (pause) transportation of all these goods and of course we all love to run around burning fossil fuel in our automobiles.  Yes we help make cars, computers, medical devices and more.

In the EU, some 25.000 chemical companies employ about 1.7 million people, or 7% of the overall workforce in the manufacturing industry.

This industry turns crude derived feedstocks, natural gas and electricity into about €300 billion worth of beneficial products for down stream industry and manufacturing.  In turn, down stream industry produces even more products and services that help society and employs an additional 3.3 million people.  It’s people who buy the goods produced by industry--the cars, computers and personal care products that keep the economy moving.

We are an industry willing to STAND UP and be ACCOUNTABLE… we want and expect society to hold us to the highest standards. 

But we expect in return to be recognized and enabled to operate in a fair, transparent and competitive framework.

On The Edge Of Change
Here we stand on the edge of massive change in Europe.  Change which is focussed on developing a knowledge-based population; being a leader in environmental protection; and on the verge of growth—politically and population wise. 

But what about from an economic perspective?  What about from a competitive perspective?  Is Europe on the verge of creating a business environment in which industry and business is drawn to this geography to create jobs, create and maintain wealth?

An enlarged Europe holds much potential, but an enlarged Europe without a concrete and growing industrial base will not result in the growth you seek, nor will it mean a stronger economic, social or environmental foundation that politicians and the people of this continent seek.

We have all have been encouraged by the words spelled out in the Lisbon Strategy, defining the EU objective to enable more jobs and prosperity for its citizens… “making Europe the most competitive, knowledge-based economy in the world.”

We have been encouraged by the EU’s recent announcement to build a Technology Platform on “Sustainable Chemistry”. They have committed to:

• Invest real dollars
• Incentivize development of energy efficient processes and technologies, and
• Breakdown barriers to innovation

But we are all concerned that the Words are not translating into action. The signals are all flashing RED.  What we see is policy that dis-incentivizes growth, penalizes industry, and negates hope of having a level playing field… between Member States and on the world stage.

What Can Be Done
As a company, and as an industry we will not sit idly by.  We are committed to do all we can to ensure a sustainable future.  But we can’t do it alone.  We need you, we need governments and other stakeholders to work together to create a competitive playing field.  We must have in Europe:

• Energy policies that support NOT disadvantage energy intensive industry
• Environmental legislation that does not distort competitiveness between the EU and other global economies
• Energy Liberalization that works
• Access to a diverse and robust supply of energy at competitive pricing: Europe can not go the way of the United States with preferential treatment of natural gas which distorts the supply/demand balance
• Security of supply: As North Sea fields are depleted we must ensure security of supply for the future.
• Shared and equitable sharing of burden between sectors: Our industry can not bear the burden of making up for increased emissions in the household or transportation sectors
• Incentives & recognition for investment in new technology:
  • Full access to Kyoto project-based instruments (JI/CDM)
  • Incentives for research and development
  • Work together to support CEFIC’s Research & Science Board to bring Phillipe Busquin’s commitment to incentivize industrial research and development to reality.

At Dow
 Dow will see our share of the 4% global chemical industry growth, but if the fundamentals in Europe don’t change, We won’t see it here.  We, nor the rest of energy intensive industry, can be the shock absorber for taxation, operational burden and distortions in the market.
 We are not giving up though… We are: 

• Working to have open dialogue about the competitive realities with governments, directly and through our trade associations;
• Focusing on innovations to improve our products and processes and to improve our energy use per unit of product produced;
• Engaging in the futures market with use of hedging mechanisms to moderate high and volatile energy and feedstock prices. These instruments will develop further, but they are applied with significant costs.
• Investing more in feedstock flexibility, more in energy efficiency and conservation and certainly more in the development of renewable sources of energy;
• Engaging in opportunities to explore alternative and renewable energies:
• Collaboration on Hydrogen fuel cells with General Motors
• Exploring use of landfill gas at our facilities
• Supporting development of LNG; and more…

Call to Action
JOIN US.  Let’s work together to build a sustainable future.  There is time to take our message and have it be heard. 

We have a strong message, we have a solid history and we have a huge impact on the fabric of Europe.  A de-industrialized Europe, one which squeezes out industry will squeeze out the possibility for a sustainable future.   That’s not in anyone’s interests.

Let’s get more engaged, let’s show again that industry can and must be a partner with other stakeholders and that only together will we all thrive.
Thank you.