- Public opinion in most countries, with a few exceptions, is hardening around the need to do more to address the changing climate.
- Companies are incorporating sustainability into their business strategies fueled by pressure from shareholders, stakeholders, and regulations.
- Rising global population, middle class result in higher demand for energy, materials and minerals placing pressure on land use.
- Humanity will need more energy in the future. But the overall energy business could shrink – in volume and in revenue. Part of it depends on how much of the fossil fuel system gets replaced by technologies that don’t use fossil fuels. A shift to renewables would use less material and less trade.
- The products derived from petrochemicals, including plastics, are likely to be indispensable for a range of low-carbon, energy efficient applications in transportation, buildings, agriculture, medical, and consumer goods. The challenge is therefore how to decarbonize the petrochemical production while still meeting the surging demand.
- Global nature of the industry makes the transition efforts economically challenging.
- Decarbonization is more than simply using cleaner fuels and improving efficiency.
- Changing production processes and systems, developing new infrastructure, developing and deploying new technologies to avoid or capture emissions in ways that are economically sustainable.
- The feasibility of different pathways would depend heavily on the development of, among other things, large-scale renewable energy deployment, green/blue hydrogen technology and infrastructure, carbon capture and storage technologies, electrification of production processes (both new and existing technologies).
- Pathways to decarbonization need to comprehensively address all elements of the chemical industry value chain – including upstream production (extraction, separation, refining etc.), downstream derivatives and end use sectors etc. Significant amounts of carbon are embedded in the final products which may be emitted over time depending on end-of-life disposition. Therefore, plastic recycling will be an essential part of decarbonization.
- Over the next 30 years, worldwide solid waste generation is estimated to increase to nearly 3.4 billion tonnes per year.
- Plastics recycling is challenging because the majority of the plastics cannot be recycled in current systems because of complexity, multi-material, customized, contaminated and have additives. The small percentage that is suitable for recycling within current systems can only be recycled a limited number of times due to degradation and therefore downgraded to lower value products.
- In a circular economy, we want to keep the molecule in play as long as possible and material at an economic value. As a part of the transition, plastics production will need to move from linear model to circularity. This potentially would include measures to manage demand, product design requirements and extensive recycling (mechanical as well as advanced).
- As a society, we have failed to see the challenge holistically, in ways that address diverse forms of materials throughout our system becoming waste. Without looking at this broadly, we will continue to compound the increasing waste issue and have a short-sighted version of system level sustainability.
- Sustainability includes multiple factors and their interactions in a wide array related to environment, social and economic aspects. Focusing solely on the separate parts creates vulnerabilities by shifting risks elsewhere in the system, thus producing unsustainable and undesirable outcomes. Circular systems are regenerative by design.
- A circular economy increases resource-efficiency, keeps materials in use and at their highest value throughout its life, decouples growth from the consumption of finite resources through responsible sourcing, reuse/repair/reman, recycling, and other strategies.
- Geopolitics can potentially result in a strong rationale for moving away from fossil fuel-based systems due to energy security needs. Depending on policy choices, the global energy trade may shrink over time. All these changes suggest that the strategic importance of oil and oil producers will decline. Companies decarbonizing their supply chains. Decarbonization pressure is moving down the chain to small suppliers in countries where there is no government pressure.
- For effective policy, the traditional approaches (carbon pricing, technology subsidies, regulations) may not be enough and would need to be extended through research and development/demonstration funding; support for deploying new technologies and infrastructure; measures to foster new markets for low-carbon materials.
- Resources that U.S. industry can bring to bear including financial resources, technical knowledge, research capacity, and workforce skills that can make it potentially a global leader for industrial decarbonization.
During the 2022 Ethylene Producers Conference, I moderated the Panel Session on the subject of “Energy Transition & Decarbonization”. In this blog, I have highlighted key points from the panel session (The panel included Derik Broekhoeff of Stockholm Environment Institute, Rachel Meidl and Jim Krane of Rice University’s Baker Institute for Public Policy).
Ethylene industry has made limited progress in decarbonization at a global level, partly driven by demand growth exceeding the energy efficiency gains. Industry can still gain energy efficiency by applying the best available technologies, but aging assets provide limited economic potential to achieve the targets leading up to net-zero emissions.
Decarbonization of Ethylene based Complexes - An example of good policy framework that creates market-based mechanism for incentives for decarbonization
A recent announcement by Dow to build the world’s first net-zero carbon emissions ethylene and derivative complex(https://investors.dow.com/en/news/news-details/2021/Dow-announces-plan-to-build-worlds-first-net-zero-carbon-emissions-ethylene-and-derivatives-complex/default.aspx) is a showcase example for the petrochemical industry.
The proposed complex will achieve this utilizing the current best available technologies. The high-temperature cracking furnaces will use hydrogen as a fuel for providing the necessary heat input for the process. This will eliminate the carbon dioxide emissions from the furnaces. Hydrogen will be generated using an auto-thermal reforming (ATR) process with a carbon capture step. The captured carbon dioxide will be transported and stored in adjacent infrastructure. (https://cen.acs.org/environment/greenhouse-gases/Dow-details-plan-decarbonize-petrochemical/99/i37). The advantage of this approach is that owners can decarbonize existing assets with minimum changes, provided they have access to infrastructure for carbon storage and utilization.
There are potentially many factors that may have contributed to the decision-making process. Canada’s Pan-Canadian Framework on Clean Growth and Climate Change played a role that creating market-based carbon pricing mechanisms and financial incentives to reduce greenhouse gas emissions and make the reductions economical. Alberta province has two market-based policies including a carbon tax and an output-based pricing system for emissions reduction. This provides certainty to businesses in their decision-making process.
The companies will have to assess individual facilities and sites to develop the most appropriate approaches as they can vary significantly from one site to the other.
At Apex PetroConsultants, we advise client teams to evaluate decarbonization approaches for each individual facility and site that are economical to meet short to mid-term targets while focusing on the longer-term net-zero approaches for new and existing assets.
Energy Transition and Decarbonization require us to look at all the options based on current ground realities:
Ethylene is energy intensive industry with a large emphasis on economy of scale and has high capital intensity. These plants take anywhere from 5 to 10 years from initial phases to start-up. All these reasons contribute to high entry barriers for this business and high sunk costs make the exit equally difficult.
The other characteristic of the industry is none or little radical innovations due to high risk and costs, in combination with the cyclical business nature leaving little appetite to invest capital in new technologies. Most of the focus historically has been on incremental improvements or innovation aimed at improving productivity. The long investment cycle leaves no appetite for testing out innovative ideas.
Ethylene also has very few specialized technology providers with low paid-up licensing fees. These providers focus on low-risk, low-cost ideas and look for opportunities for co-developments with owners/operators, and have limited resources dedicated to radical innovation.
This has led to an industry that is oligopolistic in nature.
New innovations come across huge barriers in the early stages, and these include:
At Apex PetroConsultants, we have historic and recent experience in assessing innovative technologies and advising clients during the development and decision-making process.
Ethylene is an energy-intensive process based on high-temperature steam cracking of hydrocarbons. Ethylene production emits nearly 230 million tons of carbon dioxide (rough estimate based on 2019 ethylene production) and is the fourth largest emitter amongst industrial processes. The majority of the emissions come from steam-cracking furnaces to generate high temperatures for the reaction. The heat recovery from the furnaces is fully integrated with the downstream product recovery process for achieving high overall energy efficiency. Carbon dioxide contributes nearly 97%, methane 2%, and the rest by NOx.
Global greenhouse gas emissions are estimated to be nearly 59 Gt CO2e (based on 2010 data using the emission growth rates of nearly 2.2% experienced from 2000 to 2010). Carbon dioxide contributes nearly 81%, methane 10%, NOx 7%, and the rest by fluorinated gases.
The industry has acknowledged the need for decarbonization and has started rolling out targets for managing the energy transition generally in line with the Paris climate agreement. Some companies are still trying to understand the impact of decarbonization, while others will wait for the regulations and policy guidance. Many companies have also announced efforts to promote sustainability through circularity. Companies are pooling resources to promote a more sustainable world. For example, Alliance to End Plastic Waste, with more than 80 member companies, is working with policymakers, NGOs, and local communities to end plastic waste in the environment.
The industry has still to understand and price-in the impact of sustainable and decarbonized products, and their impact on the competitive landscape globally. Policy decisions around carbon pricing will drive the solutions for all economic sectors and their global reach.
Options for Ethylene Industry
A combination of decarbonization and energy transition options and scenarios could bring the emissions to Net Zero levels. Developing an optimum combination of approaches will be dictated by regional and local factors. The companies will have to assess individual facilities and sites to develop the most appropriate approaches as they can vary significantly from one site to the other. The choices will depend on zero-carbon electricity pricing, CCS infrastructure, and availability/scale of innovative technology options to be economical.
The decarbonization options could include:
At Apex PetroConsultants, we work together with client teams to assess decarbonization approaches for each individual facility and site that are economical to meet short to mid-term targets while focusing on the longer-term net-zero approaches.
Steam cracking is an energy-intensive process. Most ethylene plants are looking for opportunities to reduce greenhouse gas emissions and reduce their utility costs to stay competitive. This, in combination with digital transformation, is one of the key focus areas for the industry.
Typical specific energy consumption can vary between 3,500 to 8,000 kcals/kg (6,300 to 14,500 Btu/lb) of product ethylene. Cracking furnaces typically contribute between 45 to 65% of energy consumption in an ethylene plant. The remainder is contributed by the recovery section, including the main compressors.
The level of energy consumption and variability of the split is dictated by many factors. The main ones include:
Generic benchmarks may provide a directional indication about the relative comparison to peers in the grouping, it is normally an insufficient approach for determining the viability and success of the programs to either strategic approach for digital transformation or to achieve environmental/energy efficiency and sustainability targets. Another weak area for external and internal benchmarks is understanding and determination of asset capability. A simplistic approach that a facility could only produce as much as it has done historically can lead to an underestimation and underutilization of its capability, therefore influencing not only the benchmarks but also operation and maintenance discipline. A systematic approach based on an understanding of all aspects of process technology/design, main equipment limits/performance, plant data along with operation/maintenance approach, etc. can not only provide a meaningful baseline but also determine the strategic approach for energy and digital transformation.
We, at Apex PetroConsultants, have a successful track record of helping ethylene plants not only determine the baseline but also help develop strategic approaches for a successful outcome. We work together with owner teams to turn these ambitious goals and objectives into reality.
Digital transformation refers to the leveraging of all industrial technologies, software, and expertise to enhance processes and workflows through competencies, and improved products with new and better efficiencies. It involves machine learning based on “big data” consisting of measurements and investigation of patterns – both structured and unstructured. This can open pathways for better resource deployment and utilization over the complete lifecycle from raw materials, through manufacturing, supply chain management, and product lifecycle. Industry must come to grips with the buzz and inflated expectations.
Each business must sort through multiple needs and competing demands under a cyclic business environment to focus on the strategic priorities that are best aligned with its vision and objectives. The list summarizes some of the business needs and demands:
At Apex PetroConsultants, we advise owner teams starting from setting strategic direction and through each of the steps along the transformation journey. We can help set current benchmarks that will set the basis for future success.
The ethylene industry is going through another phase of the cycle impacted by the convergence of multiple factors:
The cost of production in the ethylene manufacturing process depends on:
These may appear to be the obvious areas to optimize for improving competitiveness, but many owners and operators struggle to focus on improvements under the current market environment due to the:
At Apex PetroConsultants, we work together with owner/operator teams to understand the full capability of your facility to identify areas of opportunity to improve performance efficiency and plant reliability for minimizing the cost of production. We also focus on imparting working knowledge based on experience and expertise to fill the experience gap through focused training programs.
In this blog, I would like to highlight the bigger picture aspects that will shape the future of our industry. A deeper understanding will enable us to make strategic choices that not only ensure business growth but also contribute significantly in meeting future challenges.
The positive long-term outlook for petrochemicals
The demand is closely related to GDP and population growth
Energy dynamics have always impacted the competitiveness of the petrochemicals industry as feedstock plays a major role in the cost of production.
Sustainability, circularity, and environment
It is one of the more complex areas to predict with far-reaching impact on the economies, trade, supply chains, investments, etc.
Some risks and opportunities are posing challenges requiring more international cooperation.
At Apex PetroConsultants, we look forward to a healthy dialogue for helping our industry to make positive contributions and grow.
 UN DESA forecast
 IMF, World Bank, and other industry publications
 IEA scenarios
 IEA outlook
 Blogs and publications by the author, multiple industry news and publications
 WEF, IMF, CEFIC, and other industry sources and publications
I hope that everyone is staying healthy and safe!
As I mentioned in a previous blog, these are times of uncertainty and so much has happened in the last two weeks.
How well we prepare for and adapt to the new normal will determine our success. Please feel free to send me a message if you would like to discuss or brainstorm ideas and share your thoughts.
Figure 1: Cost of Production for Different Feedstock (Refer to previous blog – Sep 30, 2018)
Sanjeev Kapur is Principal Consultant at Apex PetroConsultants. He focuses on consulting/advising olefins based petrochemical businesses. He is a leading expert in petrochemicals and integration.