Speed to market - navigating your investment strategy

There is an estimated $180 billion dollars being invested in the North America chemical market, with the first wave of ethylene capacity is already online. A second wave of construction is already underway for assets coming on-stream in approximately 2021. These projects are already well into detailed engineering.

Manufacturers looking to enter the market and compete with these new units are already falling behind and need to get their plans in place as soon as possible. As the market becomes increasingly competitive speed to market becomes critical.

The window of opportunity is closing

The political climate has changed and new incentives are being put forth by the current administration to attract more investment in the US, for example:

• Market availability
• Regulatory relief
• Access to capital
• Tax reforms
  

This all represents a distinct window of opportunity. Manufacturers who had previously been only considering investing in the US, are now seriously looking to expedite those plans in order to take advantage of these changes. These changes, coupled with all the new capacity being introduced into the market, are creating a new level of urgency to optimise investment strategies and get projects online faster.

Speed to market

With multiple factors to consider, many of which are interrelated, navigating the right final investment decision (FID) is complex. To simplify these factors, they are roughly categorised into four main work streams below:

• Market access
• Strategy
• Siting
• Financing

The traditional approach to front-end development has been to develop these work streams in parallel and create the interfaces at key decision-making points. Generally, separate teams will be established for each work stream, because the nature of expertise is so specific. These may be led by outside consultants or advisors (for example, market access or site selection) or by in-house teams (for example, financing and strategy).

The challenge with establishing separate teams is that while each is very different, the output of each element has an impact on decisions made in another element. For example, selecting the right site is largely dependent on the financing approach and commercial model chosen. Commercial decisions such as partnering with another company or engaging a direct investor to own/operate the non-core asset, or setting the strategy to ensure feedstock availability all play into the criteria for site selection. So to make the right decision, these factors can’t be executed in parallel, but rather in series. This by default dictates the time to reach FID.

Advisian’s approach to increasing speed to market integrates all these factors, working each work stream in parallel and seamlessly feeding the results from one into the other. This approach reduces the number of interfaces and third parties involved, as well as the time to FID to six to 12 months.