The Future of Petrochemicals
Petrochemicals play a hugely important role in our day to day lives. Plastics, detergents, dyes and fertilizers are made from petrochemicals and the demand for these items is only expected to increase further in coming days. However, there appear to be gradual shifts in the global petrochemicals industry that are changing the way base chemicals capacities are added and utilized. Despite its size, this industry continues to take a back seat in the global energy debate. This blog will explore the petrochemicals sector in the backdrop of tailwinds and underlying recessionary issues.
What are Petrochemicals?
Petrochemicals are the chemical products obtained from petroleum by refining. The two most common petrochemical classes are olefins (including ethylene and propylene) and aromatics (including benzene, toluene and xylene isomers). Oil refineries produce olefins and aromatics by fluid catalytic cracking of petroleum fractions. Chemical plants produce olefins by steam cracking of natural gas liquids like ethane and propane and aromatics are produced by catalytic reforming of naphtha. These are stored in storage tanks and are the building-blocks for a wide range of materials such as solvents, laundry detergents and adhesives.
Growth factors for Petrochemicals Sector
The demand for plastics – the most familiar group of petrochemical products – has outpaced that of all other bulk materials (such as steel, aluminum or cement) and has nearly doubled in the last 20 years. Advanced economies, such as the United States and Europe, currently use up to 20 times as much plastic and up to 10 times as much fertilizer as developing economies such as India and Indonesia, on a per capita basis. Although substantial increase in recycling and efforts to curb single-use plastics are expected, especially in developed economies of Europe, Japan and Korea, these efforts will be far outweighed by developing economies sharply increasing their shares of plastic consumption (as well as its disposal). The growth in demand for petrochemical products means that petrochemicals are set to account for over a third of the growth in oil demand by 2030, and nearly half by 2050, ahead of trucks, aviation and shipping. Also, the United States currently holds around 40% of the global ethane-based petrochemical production capacity. The Middle East is renowned for producing key petrochemicals at low costs.
Sustainability Challenges
It is well known that plastic is not bio-degradable and this is an environmental concern. When plastic waste finds its way into the ocean, it breaks down into small pieces that are commonly ingested by marine life. As the larger debris – including containers, bottles etc. – continue to degrade over time, the quantity of microplastics could increase significantly. This will lead to research into sustainable chemical production, establishing and extending plant-level benchmarking schemes for energy performance and pursuing effective regulatory actions to reduce carbon dioxide emissions. Other headwinds may include construction of new petrochemical plants getting delayed (or even getting scrapped), as companies grapple to maintain margins, cut costs, and rationalize capital allocation.
Closing Comments
Considering the dependence on everyday items like plastic packaging, fertilizers, synthetic rubber and detergents, petrochemical products are here to stay in the foreseeable future. In developing economies, the focus on environmental degradation is not as strong as it is in developed economies and there is a lack of feasible alternatives for petrochemical products in developing economies. The production and matching of supply and demand of petrochemicals is robust and this industry is expected to prosper in coming years with a few challenges to be considered. Hence, as consumer consumption picks up in the post COVID-19 world, expect petrochemicals industries to flourish in the coming days!