The petrochemical industry in the face of an environmentally friendly future
Big players in the industry, coming from China, USA and the Middle East, are reported to be greatly increasing their number of petrochemical plants. The horizon is set: 2030 is expected to be a record-setting year for the petrochem industry, both onshore and offshore, but the question remains: what lies beyond?
According to a recent report by GlobalData, global petrochemicals’ production capacity is set for enormous growth, especially in Asia and the Middle East. Many experts agree that petrochemicals will be the most important growth driver for global oil demand, contributing 4 million of the predicted seven million barrels per day (MMb/d) oil demand growth between 2020 and 2030. That growth in oil demand could increase in petrochem production capacity from 1,583.5 million tonnes per annum (mtpa) in 2018 to 2,134.0 mtpa in 2027, according to the aforementioned report.
The petrochemical industry’s paradigm had not changed much since the early 2000s until the oil price crisis in 2014. For the most part, companies were rushing to build new facilities to capture the benefits of advantaged feedstock and strong market growth (the demand for petrochemicals has averaged 3.6% in the last decade). This situation, however, seems to be shifting as companies start implementing their mid to long-term strategies to account for future demand. Global growth rate for petrochemicals is expected to grow at a healthy rate until 2030, but the future beyond that is not as clear. The reason being environmental policies, concerns and regulations.
“Our economies are heavily dependent on petrochemicals, but the sector receives far less attention than it deserves. Petrochemicals are one of the key blind spots in the global energy debate, especially given the influence they will exert on future energy trends.”
Dr Fatih Birol, Executive Director, Internacional Energy Agency
The problem with implementing environmentally friendly solutions in the industry right now is purely economic: using renewable feedstock for petrochemicals’ manufacturing is not yet economically viable for many mainstream applications. This means uptake on the short term will be driven by either regulations or customer preference, and will not be very significant. By 2050, on the other hand, a slight reduction in petrochemicals’ demand is expected due to more efficient packaging and a decrease in the consumption of plastics driven by regulatory measures. Besides a reduction in demand, recycling rates are also expected to increase due to a variety of factors, and the uptake of renewable feedstocks will likely see a rise too, however moderate. All of those factors, combined with the changes in fossil fuel and other feedstocks’ prices and availability, will have a substantial impact for everyone involved.
Governments, agencies and customers have a great deal of sway in the future of petrochemicals. As plastic waste becomes an environmental and public health focus and carbon abatement is required to achieve climate targets, governments and citizens are more likely to intervene. Regulation and social pressure can be a useful way to push the industry forward. The petrochemical industry as a whole needs to rediscover one of the roots of its original success, its ability to substitute for traditional materials and apply it to their own portfolio of products.