The US petrochemicals industry is experiencing an investment renaissance, Steve Zinger, Wood Mackenzie Chemicals Senior Vice President, said during his appearance at the AFPM 2019 International Petrochemical Conference.
"Since 2010, we have seen over 300 planned chemical projects linked to shale gas, which some argue will generate almost 500 000 temporary and permanent jobs. In capital expenditure terms, this equates to over US$200 billion – signalling a huge increase in optimism within the industry. Most of these chemical investments have utilised gas-based chemistries and feedstocks, such as methane, ethane, propane and butane," said Mr. Zinger.
According to Wood Mackenzie, most of these US investments are expected to export to Latin America, Europe, Africa and eventually into China. "Initially, most of the US volumes were planned to end up in China, as the country accounts for higher than 30% consumption of global polyethylene. However, due to the tariffs put in place during 2018's China-US trade war, US producers are expediting their search for higher netbacks and increasingly moving the new resin supply into domestic markets, Europe, Latin America and Africa.
"China's manufacturing industry has experienced growth over the past two decades. As such, China has become the largest producer and consumer of most chemicals, including olefins. Going forward, at least for the next decade, China will retain this dominant share of the petrochemicals industry," commented Mr. Zinger.
Why are refineries moving into petrochemicals?
Refineries moving into the petrochemicals space was an important theme during AFPM's 2019 edition of the International Petrochemical Conference. Recent research from Wood Mackenzie Chemicals' highlights this trend, with a new wave of refining capacity in China expected to take place in 2020 - driven by several mega crude-to-chemicals projects.
"On top of the Hengli and Zhejiang PC projects, at least three other proposed mega-refinery and chemical projects are being planned in the seven designated chemical bases in China by private companies. In contrast, refinery capacity additions by Sinopec and Petrochina are slowing down." said Mr. Zinger.
According to Wood Mackenzie Chemicals, petrochemical feedstocks made up 13% of oil demand in 2018, with this figure expected to rise to almost 20% by 2035. "With the likely longer-term trend of declining oil demand into the all-important transportation sector, energy companies have re-evaluated their chemicals strategies. Companies like Shell, Total and BP had previously divested many of their speciality downstream chemical assets in order to focus more on their energy business and just a few core chemicals. Now, we're seeing these and other significant oil players aggressively expand their current chemicals portfolio, form alliances with chemical companies or step into the chemicals space for the first time," added Mr. Zinger.
Recycling and sustainability key issues for industry
As highlighted at the conference, there are growing number of initiatives around plastics recycling and plastic bans. “These could reduce or cause peak petrochemical demand growth in the future, especially considering a significant amount of aromatics and olefins are used within the plastics industry e.g. paraxylene for PET bottles and ethylene for polyethylene trash bags. These are the items that are targeted for increased levels of recycling and even, in some cases, replacement with non-plastics.
“Plastics producers will ultimately need to make their products more recyclable, support waste collection improvements - particularly in developing countries - and look for ways to become part of, or inject, recycling into their business or production processes,” said Mr. Zinger.
One interesting development within the plastics sphere, as highlighted by Wood Mackenzie Chemicals’ recent Q1 2019 Flexible Packaging Global Market Overview, is Amazon’s decision to move to lightweight flexible plastic mailers over its traditional cardboard boxes. As the market leader in the US e-commerce sector, Amazon is in a particularly powerful position to shape decisions on packaging preferences. Should other companies within the industry follow suit, this would signal a departure from a traditionally conservative packaging industry in North America.
“Despite these recycling initiatives and bans, the demand outlook for olefins is very robust due to increasing standards of living in developing countries. In fact, ethylene and propylene have been consistently growing at or above global GDP growth rates. As such, we expect long-term demand growth for olefins to continue to be strong for the foreseeable future,” said Mr Zinger.
Read the article online at: https://www.hydrocarbonengineering.com/petrochemicals/27032019/us-petrochemical-industry-to-experience-surge-of-investment/
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