market, giving it a vital role not only in the chemicals industry itself but the European economy as well. It is being starved of investment mainly because it relies on oil refineries for its feedstocks. But these are by- or co-products to refineries’ main output of vehicle fuels – predominantly petrol and diesel – demand for which has been declining in Europe because of factors like greater fuel efficiencies, worries about urban air pollution and accelerated sales of electric powered transport. Analysts reckon that demand for automobile fossil fuels has already peaked in Europe – ahead of other regions in the world. The only sources of demand growth in fuels will be those for heavy-duty trucks and passenger aircraft. Refinery capacity in Europe has already been steadily declining – by as much as two-thirds over the last 30 years. In 2005– 2015, France’s refining capacity was cut by a third, the UK’s and Italy’s by a quarter each and Germany by around 15 per cent. These reductions have resulted in cuts in availability of petrochemical feedstocks so that petrochemical facilities have themselves had to be closed. The survivors have tended to be refineries closely integrated with petrochemical plants. The owners of these complexes, many of them international oil companies, have been adopting strategies restricting investment to repair and maintenance and small capacity additions. Since demand for petrochemicals not only in Europe but across the world is far outstripping that for vehicle fuels, European oil producers
like Shell, BP and Total have been reversing previous policies of reducing their involvement in chemicals by increasing their chemicals investment. But the vast majority of these new funds are going into projects outside Europe. Shell, for example, is investing in schemes in the US to exploit the low-cost feedstocks from shale. The company is constructing a $6 billion ethylene cracker near Pittsburg, Pennsylvania, whose feedstocks will come from shale ethane from the large Marcellus and Utica formations. Total signed a memorandum of understanding with the Saudi state-owned oil company Saudi Aramco in April (2018) for a jointly owned petrochemicals complex in Jubail, Saudi Arabia, with a 1.5 million tonnes-per-year capacity for ethylene and its derivatives. The output would be mainly destined for high-growth Asian markets. One company adopting a different strategy has been the UK-owned INEOS, which is mainly a petrochemicals player but has recently been expanding upstream into oil and gas. It has been giving its European petrochemicals operations access to cheaper feedstocks by investing considerable sums in logistics infrastructures for transporting and receiving US shale ethane at its sites in the UK and on mainland Europe. At its refinery and petrochemicals complex in Grangemouth, Scotland, which had been operating at below capacity because of declining feedstock supplies from the depleted North Sea gas fields, the site’s future has been transformed by shipments of US shale ethane across the Atlantic.
Move to renewables Nonetheless, while overall investment in petrochemicals has become less of a priority in the chemicals sector it is putting money into preparations for a future which will be much more reliant on renewables and other lowcarbon sources of raw materials. One feature of this new era will be a circular economy in which as many materials and chemicals as possible are recycled for reuse. To ease the introduction of the circular economy, the EU has already been amending existing legislation on recycling of waste while having new regulations in the pipeline. Earlier this year a consortium of chemical companies was formed to set up a wasteto-chemistry facility at the Port of Rotterdam, the first of its kind in Europe. Many other projects looking to a lowcarbon future are being planned in chemicals clusters like Rotterdam, Antwerp and Teesside in England, which traditionally have been integrated centres of fuels and petrochemicals production. It is apt that they should be providing the platform for the emergence of a n new type of chemicals industry.
Industry Europe 11
