Considering the rapid expansion of the global petrochemical industry

For many years, crude oil has been used to make gasoline for vehicles. To maintain a competitive edge in today’s global market, firms may need to take into account oil-to-chemical complexes due to market variables. Sheikh Saj Rashid, a familiar name in the Dubai Petrochemicals industry, throws further light on the same notion.

Growth of petrochemicals and crude oil globally

The main items produced from crude oil are gasoline, diesel, and jet fuel. The global market for these goods is now growing flat to slowly, at a rate of between 0.7 percent to 0.9 percent annually. Sheikh Saj Rashid says that the effects of replacing traditional fuels, such as the market penetration of methanol, ethanol, and liquefied natural gas (LNG), as well as the slow but steady increase in electrification of the transportation fleet and the mandated improvement of global fuel efficiency standards, such as the Corporate Average Fuel Economy (CAFE) Standards implemented in the U.S., are partly to blame for this.

In contrast, the worldwide petrochemical market is expanding at a rate of around 4% annually. Yet why? Numerous factors contribute to this, such as global population increase, rising income and affluence, and population aging in industrialized nations.

Global population expansion and petrochemical usage

Petrochemical products are present in many everyday objects, including clothing, autos, and food packaging. The developed world’s North America and Western Europe, where petrochemical consumption is highest per capita, are where this consumption is most common.

Sheikh Saj Rashid adds that these populations will often start consuming more petrochemical-based goods as the world’s major population centers—especially China and India—grow and their residents move towards a more middle-class, consumption-based lifestyle thanks to rising disposable income. These regions will witness massive increases in demand, dwarfing present consumption levels in North America and Western Europe. Petrochemical demand is currently skyrocketing in less industrialized parts of the world, doubling every 12 to 15 years.

The demand is still strong and increasing in regions of the world that already consume the most petrochemicals per capita, albeit for slightly different reasons. For instance, the population in the United States is starting to get older; according to census data, the median age in the country rose from 30 years in 2000 to 38 years in 2018. The usage of transportation fuels often declines as more people enter retirement, whereas the consumption of petrochemicals typically rises. This is because they have built up riches over the course of their working lives, leading to a retirement that is heavily consumer-focused.

What will be the source of the production?

Petrochemicals are typically created by using a variety of procedures to transform natural gas liquids (NGLs), such as ethane, propane, butane, and naphtha into olefins and aromatics, the fundamental building blocks from which other chemicals are made. As per Sheikh Saj Rashid, the U.S. Gulf Coast in particular has experienced a petrochemical boom as a result of the global abundance of NGLs from shale gas resources. Butadiene, benzene, and paraxylene are heavier petrochemical products that are not sufficiently produced by steam cracking and dehydrogenation of NGLs; instead, only ethylene, propylene, and butylene are produced. Thus, there is still a need for naphtha as a petrochemical feedstock for reforming to make paraxylene or steam cracking to make butadiene and benzene.

What does a complex for oil to chemicals look like?

The oil and gas industry is very competitive. This is thus because there are very few differences in the end product or quality and practically all finished goods are fungible. These goods can be shipped anywhere in the world with ease. This implies that businesses with competitive advantages in particular geographic regions can benefit from regional expansion. For these reasons, businesses must continue to think about additional manufacturing facilities or complexes and approach them from a financial perspective.

It is anticipated that the majority of the new small-scale oil-to-chemicals complexes will be constructed in regions of the world with abundant crude oil and close to those with the fastest-growing demand. Asia, including Southeast Asia, and the Middle East are included in this. These complexes are typically constructed to take advantage of economies of scale while exceeding the capacity of proven trains for both refining and petrochemical units.

Conclusion

The crude oil industry is expected to grow at a stagnant to moderate rate, however, the petrochemical market is expected to expand significantly. To preserve a competitive edge and find a use for their crude oil production, some businesses must vertically integrate their operations to move from crude oil to chemicals.