Posted June 21, 2017 in Economic Development, Site Selection
Twenty years ago, Michael Porter, a Harvard Business School professor, published a groundbreaking article entitled “Clusters and the New Economics of Competition.” In an increasingly globalized economy where goods and services could theoretically be produced anywhere, he wondered why industries clustered in specific locations.
The reasons he found were compelling:
The notion of clustering is an important reason that the Entergy Region — which includes Arkansas, Louisiana, Mississippi and Texas — is such a great location for many large businesses. The Gulf Coast is home to what is arguably the United States’ foremost petrochemical cluster. Companies that move into our region can avail themselves of all the cluster benefits that Porter describes.
These benefits include a trained workforce with strong manufacturing skills that are kept current, thanks to a network of outstanding public and private universities, community colleges and technical schools. It is no accident that U.S. News and World Report ranks the University of Texas at Austin as the top petroleum engineering program in the nation, followed closely by Texas A&M University. Or that UT Austin also has the seventh-best chemical engineering program. The presence of these top universities also positions the Gulf Coast as a center for petrochemical research and development, for start-ups and for industry investors.
Companies located in the Gulf Coast petrochemical cluster also enjoy an exceptionally well-developed infrastructure, with thousands of miles of pipeline carrying everything from oil and natural gas to refined products and industrial gases. In addition, the region is served by six Class 1 rail lines, 21 international and regional airports and 11 major interstate highways. The area’s vendor infrastructure is also highly developed, with contractors providing products and services that range from specialized machinery and inspection to storage.
Finally, the government policies throughout the Entergy Region are strongly supportive of business. Not only do governments offer incentives for the petrochemical industry but they also invest in workforce development initiatives. The results of national polls reflect the value of these pro business attitudes. For instance, Texas ranks first in Chief Executive Magazine’s list of Best States for Business, while Louisiana’s FastStart program heads Business Facilities Magazine’s nationwide list of state workforce training programs.
The result is that clusters like the Gulf Coast petrochemical cluster set in motion a virtuous cycle, attracting new companies, which in turn strengthens the cluster and makes it attractive to other companies. It is no surprise that every global petrochemical corporation has a facility in Texas or Louisiana.
Of course, clusters can lose their competitive edge as technology moves on and buyer preferences change. The petrochemical cluster in the Entergy Region has staying power because it has advantages that have enabled it to evolve with the market.
Petrochemical companies first clustered here because of the presence of Gulf Coast oil. When the shale revolution pushed the cost of U.S. feedstock down, the region’s petrochemical companies were quick to capitalize on their competitive advantage, thanks to their access to international markets. Taking advantage of the region’s remarkable system of 11 deep-water ports, companies in the petrochemical cluster now ship high-quality, low-cost commodities like polyethylene and polystyrene to countries in South America and around the world.
There is one last but no less essential reason for the continuing growth of the petrochemical cluster—and that is reliable, affordable energy. Entergy supports the petrochemical energy by using a diverse fuel mix of nuclear, natural gas and coal to power its 40 plants. Together, they have an electric generating capacity of approximately 30,000 megawatts. One indication of the affordability of our rates is the latest Energy Information Administration rankings, which place Texas’ and Louisiana’s rates among the very lowest in the country.
But rates are only part of the story. At Entergy, we assign a dedicated team of experts to work with companies from the moment they begin thinking of opening a new location or expanding their business:
The long-term success of any cluster depends on energy. At Entergy, we take the responsibility of powering the Gulf Coast petrochemical cluster seriously. It’s another reason that if you are in the petrochemical industry, the Entergy Region is the place to be.
Puneesh has over 20 years of experience in the energy markets. Started his career with Platts and since has worked for a variety of trading houses such as BNP, EDF and Iberdrola. In his most recent role at Entergy he is responsible for short, medium and long term natural gas, LNG, crude oil and petrochemical market fundamentals and quantitative analysis, involving conceptualizing, designing and implementation of analytical tools and models and communicating a point of view around these commodities and their impacts to Entergy’s Industrial load.
