ICF's Report to the Governor - Office of the Governor - Rick Perry

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56 FIGURE 52: FIRM AUTONOMY—PERCENTAGE OF HEADQUARTERS, BRANCHES, AND STANDALONE FIRMS 80% 70% 60% 50% 40% 30% 20% 10% 0% BASIC PRODUCT MANUFACTURING CONSUMER PRODUCT MANUFACTURING INPUT MANUFACTURING INTERMEDIATE PRODUCT MANUFACTURING OIL AND NATURAL GAS PETROLEUM REFINING REGULATION AND ADMINISTRATION Branch Headquarters Standalone TRANSPORTATION AND LOGISTICS Source: D&B NETS Dataset, 1998–2006 3.7 PETROCHEMICAL CLUSTER CONCLUSIONS: AN EXPANDING STAGE CLUSTER In sum, not only is Texas highly specialized in the Petrochemical Cluster, but its competitiveness has grown 11 percent since 2000. Average employment has increased 2 percent each year, and the cluster continues to outpace all peer locations other than the much smaller Oklahoma market. The full value chain of the Texas Petrochemical Cluster elements enables the state to support the spectrum of cluster activity and remain competitive in the United States and internationally. The cluster has a very high degree of stability and employment is concentrated in large, established firms. This stability has created a competitive base that does not support a high degree of entrepreneurship, but does encourage in-migration of firms from other U.S. states. The Upstream and Downstream compositions of the Petrochemical Cluster show a highly successful agglomeration of individual segments. The majority of this cluster resides in or near the Expanding stage of the life cycle. Drilling Oil and Gas, Oil and Gas Field Machinery and Equipment, Support Activities to Oil and Gas Operators, Natural Gas Liquid Extractors, Oil and Gas Pipelines, and Crude Petroleum and Natural Gas Extractors all are distinctive because they are large employers, growing faster than the average annual growth rate, and highly specialized in Texas. ALL FIRMS ICF International 08-058 ~ July 2008
Achieving a portfolio of Expanding stage clusters is, of course, the goal of any state competitiveness strategy. With Emerging stage clusters, the issues concern the needs of a rapidly growing and changing industry, while the issues of a well-established Expanding industry are more focused on managing the challenges of scale, preserving competitive advantages, and reducing marginal costs. With such industries, the state’s role is often focused on ensuring that existing economic foundations are keeping up with and continuing to respond to this cluster’s needs. For this reason, concerns focus on the following issues: WORKFORCE—SUSTAINING AND RENEWING SKILLS. The petrochemical industry has a large and diverse workforce that is nearing retirement age. For a variety of reasons, it is facing challenges in replenishing its skill base in specific areas. A state role is essential in building the skills pipeline from K-12 up, including linking youth to career opportunities, fostering and retaining graduatelevel science and engineering skills, and enabling workers to obtain retraining to switch jobs as demand changes. RESOURCES—FEEDSTOCKS. The petrochemical industry specializes in extracting resources and processing chemicals. It is also concerned with accessing reserves and with the source and cost of feedstocks to produce chemicals, including biofuels. The state role has historically been involvement with setting the stage for exploitation of new resources or coordinating and assisting development of new sources. INFRASTRUCTURE—ADAPTING AND UPGRADING CAPACITY. The more mature and large-scale petrochemical industry faces challenges pertaining to aging public and private infrastructure and the capacity of railways, ports, terminals, waterways, pipelines, and highways. Infrastructure is also crucial for new industry developments or expansion. The state’s role in this industry tends to focus on planning and financing of public infrastructure, and, increasingly, using new concepts to organize delivery and sharing of energy, water, waste, and intermodal logistics (e.g., special development districts, brownfield creation, inland ports, and infrastructure corridors). INNOVATION—BUILDING FROM DEEP FUNDAMENTALS. The petrochemical industry has financial resources to serve its innovation needs; however, the challenges the industry faces may require new research partnerships and increased collaboration with universities to achieve breakthroughs. These efforts may focus on areas such as development of new fuel sources, petrochemical feedstocks, and carbon sequestration technologies. The state can act as a neutral convener of stakeholders to focus a critical mass of attention on shared R&D issues and help organize new centers of excellence and institutes that can perform the strategic early-stage research that industry is willing to finance. GOVERNANCE—PERMIT EFFICIENCY AND LEVEL PLAYING FIELD. The capital-intensive, large-scale petrochemical industry is always concerned about the cost of doing business. Because it is extremely difficult to close or move a facility, concerns often focus on ensuring that new projects can move through the state approval processes as consistently as possible. Much of the industry focus is on ensuring that the state tax burden is as even as possible and that the legal environment minimizes liabilities, particularly where they arise from compliance with federal mandates. ICF International 08-058 ~ July 2008 57
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TABLE OF CONTENTS LIST OF FIGURES 2
Page 5 and 6:
Figure 42 Number of Petrochemical E
Page 7 and 8: AAGR average annual growth rate NGL
Page 9 and 10: 3. INVEST IN ECONOMIC ADVANTAGE. Cl
Page 11 and 12: The Energy Cluster and its value ch
Page 13 and 14: Key Trends Affecting the U.S. Marke
Page 15 and 16: FIGURE 4: ELECTRICITY PRODUCTION CA
Page 17 and 18: 2.3 ENERGY CLUSTER ANALYSIS Seven s
Page 19 and 20: As the benchmark comparison of grow
Page 21 and 22: 2.3.2 Diversity: How Broad Is the T
Page 23 and 24: Concentration (LQ) Hydroelectric Po
Page 25 and 26: Overall, Texas has a very broad and
Page 27 and 28: STRONG ENTERPRISE FORMATION: As Fig
Page 29 and 30: FIGURE 24: FIRM AUTONOMY—PERCENTA
Page 31 and 32: ICF International 08-058 ~ July 200
Page 33 and 34: The Petrochemical and Upstream Clus
Page 35 and 36: petrochemical industry will be less
Page 37 and 38: Figure 30 shows the trend in both r
Page 39 and 40: The refining capacity outlook indic
Page 41 and 42: LNG Regasification Terminals Being
Page 43 and 44: Oil Production Comparisons TEXAS AN
Page 45 and 46: Subcluster Value-Chain Element Cons
Page 47 and 48: Figure 40 provides a data-table for
Page 49 and 50: 3.6.2 Diversity: How Broad Is the T
Page 51 and 52: Concentration (LQ) ICF Internationa
Page 55 and 56: Value Chain Position Cluster Produc
Page 57: FIGURE 51: FIRM DYNAMISM—PERCENTA
Page 61 and 62: 4.1.2 The Texas Energy and Petroche
Page 63 and 64: 4.1.3 Workforce Demand: Projection
Page 65 and 66: As with many industries, the need f
Page 67 and 68: Renewal: Is Texas Retaining and Har
Page 69 and 70: The primary skills pipeline challen
Page 71 and 72: Preparation Challenge 1: Prepare St
Page 73 and 74: Challenge 6: Improve the Ability to
Page 75 and 76: EXPAND THE CAPACITY AND REACH OF TH
Page 77 and 78: The data should reside in an online
Page 79 and 80: NATURAL GAS. Texas is the nation’
Page 81 and 82: FIGURE 67: DRY NATURAL GAS PROVED R
Page 83 and 84: Challenge 7: Biofuel Growth. The bi
Page 85 and 86: 4.3.2 Texas Status and Comparative
Page 87 and 88: LIQUEFIED NATURAL GAS TERMINALS. Te
Page 89 and 90: Impacts on Texas’s Competitive Po
Page 91 and 92: COORDINATION OF INFRASTRUCTURE DEVE
Page 93 and 94: The competitiveness of the Texas En
Page 97 and 98: COMPARISON TO FOREIGN SCIENCE PUBLI
Page 99 and 100: FIGURE 83: INDUSTRIAL R&D EXPENDITU
Page 101 and 102: Impact on Texas’s Competitive Pos
Page 103 and 104: 12 10 ICF International 08-058 ~ Ju
Page 105 and 106: FIGURE 91: VENTURE CAPITAL INVESTME
Page 107 and 108: Challenge 3: Advance Biofuel Feedst
Page 109 and 110:
Texas may also need a targeted ince
Page 111 and 112:
ICF International 08-058 ~ July 200
Page 113 and 114:
Legal Environment Challenges ICF In
Page 115 and 116:
SECTION FIVE: ACHIEVING COMPETITIVE
Page 117 and 118:
Challenge: Harnessing Texas Resourc
Page 119 and 120:
Conclusion: Sustain Texas’ Compet
Page 121 and 122:
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ICF's Report to the Governor - Office of the Governor - Rick Perry

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