Dow biggest spender with feedstock and energy bills eating up half of running costs

A new survey has revealed huge disparities in energy consumption between the world’s biggest chemical companies - with the Japanese specialty chemical firm Shin Etsu Chemical spending 2 per cent of its total operating costs on energy, and the top spender, Dow, spending around 7 per cent.

When spending on hydrocarbon feedstocks was added in, Dow’s expenditure rose to 49 per cent of its running costs.

The Carbon Disclosure Project - an independent not-for-profit organisation based in London, UK - queried the world’s largest companies about their environmental impact data, including some of the major chemical corporations. A report released on 20 September at a New York City press event summarises the findings. The data will provide a benchmark to measure environmental performance and track improvements.

’Some companies have their heads on straight and others don’t,’ Paul Dickinson, the CDP’s chief executive, told Chemistry World. Those that have processes in place to control negative environmental impacts will make a lot more money, while the companies that are trailing in this area will flounder, he predicted.

Dow spokesman Chris Huntley said the firm’s energy costs are high not because it is less efficient, but because it requires more energy than companies further down the supply chain.

’The chemical industry recognizes that it is a huge user of energy,’ said Huntley. ’We are looking for more efficient processes - if you can reduce your energy bill you are going to save money.’

Dow’s operating costs are around $50 billion (?25 billion) but it racked up a $22 billion energy and feedstock bill last year. The figure represents a dramatic rise from the $8 billion the company spent in 2002.

’Energy prices have gone ridiculous, so that provides even more incentive for us to build things into our processes and production facilities that help us to keep saving energy,’ Huntley said.

"Energy prices have gone ridiculous, so that provides even more incentive for us to build things into our processes and production facilities that help us to keep saving energy" - Chris Huntley

Furthermore, it is likely that most countries will have some form of emissions restrictions within a few years, and chemical makers are concerned that regulations could drive up the cost of energy even higher - particularly the price of natural gas - which they use both to produce energy and as a raw material.

The three chemical companies that reported their energy costs made up 19 per cent of the total reported expenditure. By comparison, the integrated oil and gas sector and 10 pharmaceutical companies accounted for 22 per cent and 1.5 per cent of the total, respectively.

Several chemical makers, like BASF and Bayer, reported energy expenditure as a proportion of sales - rather than operating costs - making direct comparisons with the Dow figure difficult. However, BASF’s spend on energy and feedstock was 2.5 per cent of sales and Bayer spent 3.0 per cent. 

’This a big thing and it is going to get bigger every year,’ Dickinson stated. ’Energy prices will go in one direction forever, it’s an unstoppable process.’

Former US President Bill Clinton agrees. Speaking at the launch of the survey report in New York, he said that when it comes to climate change, corporate accountability is ’good economics and imperative to our future’.

Rebecca Trager is US correspondent for Research Day USA 

This article has been amended since its original publication on 28 September to reflect information received from several chemical firms. Specifically, Dow’s figure for spending on energy and feedstock was given as a proportion of running costs in the CDP report, while Bayer and BASF stated their costs as a proportion of sales.