Business Trends: Petrochemicals 2025: Three regions to dominate the surge in petrochemical capacity growth
The global petrochemical sector continues to expand exponentially as developing nations’ demand for petrochemical/chemical products continues to increase.
The global petrochemical sector continues to expand exponentially as developing nations’ demand for petrochemical/chemical products continues to increase. In its “Oil 2018” report, the International Energy Agency (IEA) forecasts that approximately 25% of the increase in oil consumption to 2023—nearly 1.7 MMbpd—will be from demand for petrochemical feedstocks. The IEA’s long-term petrochemical forecast shows an even greater amount of oil demand from the petrochemical sector. In the organization’s “The future of petrochemicals” report, the IEA forecast that the petrochemical sector will account for one-third of oil demand growth to 2030, increasing to nearly half to 2050. According to the report, production of key plastics will more than double between 2010 and 2050.
FIG. 1. Market share of new petrochemical project announcements by region, December 2017–December 2018. Source: Hydrocarbon Processing’s Construction Boxscore Database.
Growing demand centers in the Asia-Pacific region will be met by billions of dollars of new petrochemical production capacity in Asia, the Middle East and the US. These three regions are investing heavily to boost petrochemical processing capacity to satisfy demand.
Many non-OECD countries are witnessing petrochemical demand rates increasing faster than GDP growth. Several nations will remain dependent on petrochemical imports, while others are investing to satisfy domestic chemicals demand. Multiple factors will determine the future of the petrochemical industry: supply/demand factors, plastics recycling, regulations, feedstock costs, partnerships/mergers/acquisitions, digitalization, etc. Many nations are investing heavily to satisfy domestic petrochemicals demand and/or export petrochemical products to increase revenues.
New/active projects
According to Hydrocarbon Processing’s Construction Boxscore Database, more than 280 new petrochemical projects were announced from 2016–2018. New petrochemical project announcements increased from 68 in 2016 to 88 in 2017 to 125 in 2018. This trend represents a year-over-year increase of 29% and 42%, respectively. Most new petrochemical project announcements have been in the Asia-Pacific region. The region continues to invest a substantial amount of capital to increase petrochemical capacity to mitigate imports and satisfy increasing domestic demand. Over the past 3 yr, the petrochemical sector has maintained 36%–41% of new project market share, and has been the leader in new project announcements since 2016. Over the past year, Asia-Pacific and the US have been the leaders in new petrochemical project announcements, accounting for nearly 70% of all new petrochemical project announcements over the past year (FIG. 1).
At the time of this publication, the Boxscore Database was tracking nearly 470 active petrochemical projects around the world. A breakdown on active refining project market share
is provided:
- Africa—6% (29 projects)
- Asia-Pacific—34% (158 projects)
- Canada—1% (7 projects)
- Western Europe—5% (22 projects)
- Eastern Europe, Russia and the CIS—12% (55 projects)
- Latin America—6% (28 projects)
- Middle East—13% (63 projects)
- US—23% (106 projects).
In total, the Construction Boxscore Database is tracking nearly $510 B in active petrochemical projects around the world. Asia-Pacific is the leader in capital expenditures (CAPEX) in the near term. The Boxscore Database is tracking more than $200 B in active petrochemical projects in Asia. The US has more than $100 B in active petrochemical projects, followed by the Middle East with nearly $90 B in active projects. These three regions represent not only 76% of total active projects, but also nearly 79% of announced CAPEX in petrochemical capacity additions globally. A breakdown of CAPEX in the petrochemical sector, by region, is provided:
- Africa—$32 B
- Asia-Pacific—$205 B
- Canada—$10 B
- Europe—$48 B
- Latin America—$19 B
- Middle East—$88 B
- US—$105 B.
According to the IEA petrochemicals report, nearly all regions, except for Europe, will increase production of primary chemicals to 2050. The largest capacity growth is seen in the Middle East and Asia. The Middle East is forecast to increase production of high-value chemicals, ammonia and methanol from approximately 70 MMtpy to more than 150 MMtpy by 2050. Nearly all Middle Eastern nations are investing in new petrochemical production capacity to mitigate the reliance on crude oil export revenues.
The region has already boosted production capacity, led by Saudi Arabia, and more investments have been announced. The Asia-Pacific region’s petrochemical buildout is forecast to increase by nearly 200 MMtpy to nearly 500 MMtpy by 2050. China and India will be the leaders in new petrochemical capacity additions; however, multiple Asian nations have announced capital-intensive projects. Many of these projects will help mitigate growing supply and demand gaps and will be built alongside refining operations. The move toward refining and petrochemical integration is a primary focus of many operators around the world, especially in Asia. The ability to share feedstocks allows producers to produce petrochemical products more efficiently.
Asia-Pacific
To help mitigate imports and to satisfy robust demand, many Asia-Pacific nations are investing in the expansion and debottlenecking of petrochemical units, as well as the construction of grassroots petrochemical complexes. These capital-intensive investments include increased integration between refining and petrochemical facilities to increase efficiency and value.
At the time of this publication, the Construction Boxscore Database was tracking nearly 160 active petrochemical projects in the region. China accounts for nearly half of all petrochemical projects in the region. India is second in the region, with 15% market share in active petrochemical projects. When broken down by activity level, more than 70% of the region’s petrochemical projects are in preconstruction phases, with approximately 43% in the planning/proposed phase:
- Engineering—19%
- FEED—4%
- Planning/proposed—43%
- Study—7%
- Under construction—27%.
China’s Belt Road Initiative calls for the massive development of domestic petrochemical production capacity to mitigate imports. According to an ICIS report, China plans to add 21 new steam crackers and 10 new refineries in petrochemical industry parks. This buildout could equate to nearly 27 MMtpy of new ethylene production by the mid-2020s, reaching more than 42 MMtpy.
Due to increasing demand for petrochemical products, India will continue to heavily invest in additional petrochemical production capacity. According to IHS, India’s domestic ethylene capacity has increased from 4 MMtpy in 2014 to 7.2 MMtpy in 2018. However, with petrochemicals demand forecast to increase substantially, additional capacity will be needed to satisfy demand and mitigate imports. According to a report by McKinsey and Co., India’s petrochemicals shortfall could increase to 25 MMtpy by 2025 if investments in new production capacity are not made. However, the nation’s operators have announced plans to invest more than $30 B to boost petrochemical capacity.
Middle East
In response to the decrease in oil prices that occurred from 2014–2016, and to mitigate reliance on oil export revenues and diversify their product portfolios, nearly all nations in the Middle East have announced capital investments in new downstream processing capacity, especially in the production of petrochemicals. The region has the largest cost advantage in ethylene production, and several countries are building, or planning to build, mixed-feed crackers, as well as ethylene derivatives, ammonia/urea and other petrochemical capacity.
Saudi Arabia is the leader in new petrochemical capacity investments. The Kingdom plans to nearly triple petrochemical production capacity from 12 MMtpy in 2016 to 34 MMtpy by 2030. The country will accomplish this goal by adding petrochemical capacity to existing refineries, as well as building grassroots facilities. Several other nations are investing heavily in domestic output. Major projects include:
- Kuwait—Olefins 3-Aromatics 2 project
- Oman—Liwa plastics project
- United Arab Emirates—Ruwais refining and petrochemical park, including the construction
of Borouge 4
- Qatar—Ras Laffan petrochemical complex (proposed)
- Iran—Mokran petrochemical complex
- Iraq—Nebras petrochemical complex.
U.S.
Due to the shale gas boom, the US has witnessed a renaissance in its domestic petrochemical industry. Cheap, readily available shale gas feedstock has allowed the country to become one of the world’s lowest-cost ethylene producers. In turn, the US is building millions of tons of additional ethylene and ethylene derivatives production capacity.
The Hydrocarbon Processing Construction Boxscore Database is tracking 115 active petrochemical projects in the US. More than 70% of the country’s petrochemical projects are located in Louisiana and Texas. These two states will be instrumental in boosting ethylene and ethylene derivatives, methanol and specialty chemicals capacity into the early 2020s.
By the end of the decade, the US is also forecast to add more than 10 MMtpy of new ethylene capacity. This boom in ethylene capacity includes more than 9 MMpty of grassroots facilities, as well as more than 1.2 MMtpy in ethylene capacity expansion projects. Most of the country’s grassroots facilities will include derivative units. In total, US petrochemical producers will invest nearly $20 B in new ethylene capacity by 2020. A second wave of new ethane crackers could add more than 5 MMtpy of new capacity after 2020. In total, capital expenditures for both ethane cracking project waves could top $50 B by the mid-2020s.
The largest ethylene derivative capacity expansion will occur in the production of polyethylene (PE). By 2020, the US will add approximately 8 MMtpy of new PE capacity, most of which will be integrated into new ethane cracking operations; however, grassroots PE plants are also being built. According to Platts, PE surplus in the US reached more than 4 MMtpy in 2017 and could increase to 7.5 MMtpy in 2020. This trend will make exporting US PE a must for producers. HP
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