Dow Chemical mulls energy field stake

Doug May, (L) vice president of Energy, Climate Change and Alternative Feedstocks for The Dow Chemical Company and Peter Molinaro, (R) vice president of Federal and State Government Affairs for The Dow Chemical Company, speak at the Reuters Global Climate and Alternative Energy Summit in New York, October 13, 2010.

NEW YORK (Reuters) - Dow Chemical (DOW.N) is considering investing in a wider range of raw materials that it uses to make its products, including an oil or natural gas field, but does not expect alternative energy sources to replace fossil fuels for many years.

Dow, the largest U.S. chemical producer, consumes about 1 million barrels of oil and natural gas equivalents per day. The company is also doing research on several different kinds of alternative, cleaner energy, including algae and ethanol.

"We're being as creative as we can in terms of how do we get secure supply at the right economics," Doug May, Dow Chemical's vice president of energy and climate change, told the Reuters Global Climate and Alternative Energy Summit.

The Midland, Michigan-based company does not own stakes in any oil or natural gas fields.

Earlier this week, China's top offshore oil producer, CNOOC Ltd (0883.HK), bought a stake in a U.S. shale oil and gas field owned by Chesapeake Energy Corp (CHK.N).

When asked if Dow is interested in an investment akin to CNOOC's, May said, "yes."

Many large energy consumers such as Dow realize that they must diversify their feedstock supply -- the material they use to make their products.

They are doing this as social and governmental pressure mounts on companies to reduce the amount of harm they cause the environment.

Still, crude oil isn't going away any time soon.

"In 100 years from now, I could envision a day where Dow is (fully) using alternative feedstocks," May said. "But it will be a long transition to that time frame."

Dow has an algae joint venture project under way. When finished, the technology should help it dispose of its carbon dioxide waste and produce an alternative fuel in the process.

That venture, run with Algenol Biofuels, is in the development phase in Texas, May said.

Funded in part by a $25 million grant from the U.S. Department of Energy, the project, as Dow sees it, is the future of alternative energy research: governments pick up part -- if not most -- of the tab.

"The government needs to help you take on that journey, because otherwise it wouldn't be taken," May said.

Nuclear technology may help satiate Dow's need for not only electricity, but heat. While Dow does not want to run a nuclear plant, it might partner with a nuclear operator, May said.

Many chemical processes require high temperatures to operate.

Ethanol made from sugarcane also shows some promise, though corn-based ethanol needs more research and investment, May said.

While the United States is sitting on one of the world's largest reserves of natural gas, Dow does not believe the fuel should be used to power cars.

"We think there's more efficient and productive uses of natural gas than moving it into transportation," May said. "Putting natural gas into a power plant and using that electricity to power electric cars is a much more efficient use of natural gas."

CLIMATE CHANGE

The company does not expect the U.S. Congress to pass climate change legislation at once, but rather in chunks, Peter Molinaro, Dow's vice president of government affairs, told the Reuters Summit.

"We're all going through the process of rethinking how one does energy and climate change policy in a different political environment," he said.

Dow is sending a representative to the United Nations climate change talks in Cancun, Mexico, later this year, though it is not hopeful that the participants can reach an accord.

"We don't expect a lot of meaningful conclusions," May said. "Ultimately, getting to a global agreement is important, but we don't expect Cancun to be one of those milestones you look back on and see as an inflection point."

Shares of Dow fell 3 cents to $29.78 in afternoon trading.

(Reporting by Ernest Scheyder. Additional reporting by Mike Erman and Steve James. Editing by Robert MacMillan)