Do US companies get accelerated depreciation when they install the equipment in Asian countries?
I'm of the opinion it required US Capex with in the US.
Do foreign companies get accelerated depreciation when they buy from US companies?
Yes if they buy a US company and change domicile.
They seem to be doing it regardless:
Petrochemicals boom in full swing on Gulf CoastFueled by a bounty of natural gas, the area has become an export hubBy Jordan Blum
September 3, 2015 Updated: September 5, 2015 11:35am
Photo: James Nielsen, Staff
IMAGE 1 OF 14
LyondellBasell CEO Bhavesh "Bob" Patel, left, and plant manager Todd Monette pass through the olefins plant in Channelview.
Bhavesh Patel said he took a big risk in joining chemical giant LyondellBasell during the "dark days" in 2010 when the company was struggling through bankruptcy.
As a senior vice president, he soon received the task of leading widespread layoffs and plant closures around the world. Five years later, Patel is the CEO overseeing $4 billion in planned spending for a rapid succession of expansion projects along the Gulf Coast by 2020, including additions to LyondellBasell's Channelview complex.
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This petrochemical boom began over the past decade, as natural gas prices fell when new technology boosted production from dense shale formations. Patel and others say projects are continuing even though falling oil prices, also related to the shale boom, are putting a drag on the Gulf Coast economy.
Natural gas is both raw material and fuel for petrochemical production, and the industry's expansions have made the Houston area the birthplace of many products exported to China and the rest of the developing world.
MORE INFORMATIONThe building blocks
Here are locations of some multibillion-dollar petrochemical plant projects underway on the Gulf Coast, what they'll produce, how much they'll cost and when they're scheduled to come online:
Exxon Mobil Chemical - Baytown, Mont Belvieu: Ethylene and polyethylene; $6 billion; 2017
Chevron Phillips - Baytown, Old Ocean: Ethylene and polyethylene; $6 billion; 2017
Dow Chemical - Freeport: Ethylene, polyethylene, propylene and plastics; $4 billion; 2017
BASF and Yara - Freeport: Propylene and ammonia; $2 billion; 2018
LyondellBasell - Channelview, La Porte, Corpus Christi: Ethylene; $1.3 billion (additional projects pending); 2016
C3 Petrochemical - Alvin: Propane dehydrogenation; $1.2 billion; 2017
Sources: American Chemistry Council, University of Houston Bauer Institute for Regional Forecasting
"Those of us who have been in this business for 30 years would never have imagined Texas and Houston to be the big export hub for petrochemicals," Exxon Mobil Chemical President Neil Chapman said, noting that there had been little petrochemical growth in the region for at least 15 years.
The American Chemistry Council counts 243 announced projects with a cumulative investment of $147 billion from 2010 to 2023. More than 60 percent comes from foreign investment, and a small majority of projects remain in the planning stage. Global chemical demand is expected to double from 2000 to 2040 but stay flat in the U.S.
Texas alone accounts for 99 of the projects with a total value of $48.2 billion, and most of those are in southern parts of Texas, including Houston, Corpus Christi and Beaumont. That means 15,800 direct new jobs in Texas - not counting construction jobs - and 67,000 nationwide, the council projects.
Patel, who goes by Bob, visited the control room for the $200 million Channelview expansion shortly before it fired up last month. It eventually will produce 250 million pounds annually of ethylene, the primary building block of most plastics.
"It's great to see the expansions and all the new shining steel," Patel, a chemical engineer, told the workers.
He's overseeing a rapid turnaround for a once-struggling company that has hired about 500 people and plans soon to bring on another 250 - mostly plant operators - in the Houston area.
Patel, a native of India whose family moved to the U.S. when he was a child, knows what tough times are like, and he insists the company will not overbuild and will avoid sizable layoffs during downturns.
"We're directing the company in a way we'll have some stability in terms of job security," he said. "We're likely not to pause on the growth as a result of the low oil price."
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The shale effect
All this growth is possible because the bountiful and cheap natural gas in the U.S. means companies pay less for ethane and other gas byproducts used as feedstocks to make the chemicals and plastics.
Most of the world uses a feedstock called naphtha drawn from more expensive crude oil. So it is more affordable to manufacture the chemicals and plastics in the U.S., where natural gas is abundant, and then export them.
Natural gas feedstock prices are still advantaged even with U.S. oil prices hovering just above $40 a barrel, although that price might not have unleashed the petrochemical construction the area is experiencing, said Bill Gilmer, who directs the Bauer Institute for Regional Forecasting at the University of Houston.
Exxon Mobil Chemical is investing close to $6 billion to increase the production of ethylene and polyethylene - the world's most common plastic - at its Baytown and Mont Belvieu plants. The project represents Exxon Mobil's first major U.S. chemical expansion in more than 15 years, with completion slated for 2017.
Companies including Chevron Phillips Chemical Co., Dow Chemical Co. and BASF also are investing billions in the Houston region.
"You're taking shale gas, you convert it into chemicals, and you're shipping those chemicals to this growing middle class in the developing world," Exxon Mobil Chemical's Chapman said.
As those people acquire greater wealth, they buy more plastic and rubber products, including automobiles, which contain increasing amounts of these materials, said Chapman, a native of England who moved to Houston in 1993.
About two dozen cranes are visible towering above the Baytown plant expansion, putting the new infrastructure in place. The additions include a steam cracker that will add 1.5 million tons per year of of ethylene capacity to the 2.2 million tons in place now.
Exxon Mobil also is adding 1.3 million tons in annual polyethylene capacity in Mont Belvieu, about 30 miles east of Houston.
The oil offset
Houston-area exploration and production companies and oil field services businesses shed jobs by the thousands this year as oil prices plummeted, but the petrochemical surge is serving as a temporary, partial offset to the job losses.
Houston offers the knowledge base, the cheap natural gas, the historical infrastructure and the Houston Ship Channel access, Gilmer said.
"It's the classic cluster," Gilmer said. "We have this massive system of pipeline under east Houston. It used to be called the spaghetti bowl. And I guess we have maybe a different attitude about building a chemical plant as opposed to New York in terms of public opinion."
As such, the Houston region likely will still add nearly 20,000 jobs this year, with much of that growth from temporary construction jobs on these projects. Last year the area added about 104,000 jobs.
"The construction is temporary, though. They're going to be gone in two years," Gilmer said. "So you have to be real careful about the plus-20,000 jobs."
Exxon Mobil Chemical, for instance, will have 10,000 peak construction jobs during its expansion, but 350 permanent new jobs will last after 2017.
Chapman says the expansion will have direct and indirect economic impact of $1 billion.
Most of its product is exported, so the expansions at Mont Belvieu and Baytown will generate additional trucking, longshoreman and shipping jobs in addition to work at the plant, he said.
Because the Baytown and Mont Belvieu plants have become more efficient in recent years, they have reduced their emissions levels, and the expansion will keep the plants within their permitted levels, Chapman said.
The expansion also involves producing a thinner polyethylene that is just as strong, he said, so it becomes more environmentally sustainable by producing less material.
Even with cheap oil prices now, the petrochemical projects make sense because the natural gas abundance should last for decades in the U.S., said Bobby Tudor, CEO of the Tudor Pickering Holt & Co. energy investment banking firm in Houston.
That's why LyondellBasell acted quickly to expand its capacity and get a head start on other companies building facilities that won't start up until 2017 or later. LyondellBasell also restarted a Channelview methanol plant last year that sat dormant for nearly a decade when natural gas prices were higher.
LyondellBasell, which is domiciled in the Netherlands but has its operational headquarters in Houston, added 800 million pounds of annual ethylene capacity at its La Porte plant last year and, in 2016, will finish another 800-million-pound expansion at its Corpus Christi plant. The company is planning to grow again in Channelview by tacking on 550 million pounds in annual capacity.
Patel said he is reasonably confident the company will decide next year to move forward with a plant to produce 900 million pounds of propylene oxide and 2 billion pounds of tertiary butyl alcohol annually. The substances are used to make products including antifreeze, cosmetics and solvents.
Space to expand
LyondellBasell is still just using 1,000 of its 4,000 total acres at Channelview, Patel said, so that space is a strong contender for the new plant. He also said the company is looking to build a new polyethylene plant at one of its southern Texas sites, whether in Channelview or as far out as Matagorda or Victoria. An announcement likely will come later this year.