The Emergence of the Circular Economy as a New Market in the Petrochemical Sector

In the energy industry, oil and gas continue to maintain a position of prominence, but the sector is currently undergoing a transition, changing its focus from crude oil resources for hydrocarbon-based fuel production to chemical manufacturing.

S&P Global Commodity Insights recently released revisions to its projections for direct crude oil-to-chemical capacity (COTC) growth, with an anticipated significant increase to 6 million barrels per day (b/d) by the year 2050.

This projection considers the anticipated decrease in crude refinery runs, which could result in a net loss of 10.7 million b/d in comparison to levels recorded in 2022. By 2050, a complete investment of $137 billion is anticipated for more petrochemical production (only the refinery portion of the investments is included, i.e., COTC & integrations, to the exclusion of further chemicals’ manufacturing process investments).¹

Combined with a high degree of investment, the petrochemical industry is also seeing substantial transformations due to market forces and trends.

This article will thus explore some of the core developments that have taken place in the fast-growing and transformative petrochemical market, with a focus on the increasing need for circular economy initiatives.

It will also look at selected PAC solutions that assist in addressing current and future needs for examining a variety of streams like heavy crude for COTC, waste plastic pyrolysis oil (WPPO), and bio-based streams to be processed in petchem-FCC or steam cracker units.

Market Forces and Recent Trends Shaping the Petrochemical Industry

There are a number of trends and market forces that are shaping the future landscape of the petrochemical industry. These include economic factors, environmental regulations, public pressure, and technological advancements.

The recent advancements include revamping existing units for higher yields of petrochemical building blocks, novel direct feedstock conversion techniques, improved chemical recycling technologies, and advanced catalysis.

Companies need to find a way through these trends and forces to ensure efficiency and arrive at informed investment decisions, offering both uptime and innovation and allowing future-proofing of their existence during a disruptive era. ²

Due to public, financial, environmental, and technological forces, specific trends have appeared that can alter how companies conduct their businesses, as described below.

Expanding the Use of Plastics and Circular Economy Incentives

Plastics continue to play an increasingly important role across a number of different industries, including in the production of green technology, such as electric cars, wind turbines, and solar panels.

The overall amount of plastics that have been manufactured globally since the early 1900s has reached ~10 billion tons and more than half of this remains in the form of waste.³ This is mainly caused by the low average global recycling rate of plastics, estimated at around 9 %.³

The increasing worry surrounding plastic waste has resulted in increasing emphasis on circular economy initiatives. Efforts to increase sustainable consumption of plastic and embrace circular economy approaches were highlighted at the United Nations Environment Assembly meeting in 2022, where a consensus was reached to establish a global treaty on plastic pollution by 2024.^2,4,5

Shrinking Margins of Refineries

Refineries, which are the petrochemical industries’ primary source of feedstock, are dealing with narrowing margins. This is due to factors like intense competition, unstable crude oil prices, and stricter environmental regulations.

The result is refineries that are navigating diversification strategies, investing in petrochemical units, and adopting more sustainable practices for enhanced profitability. This has meant a rise in conversion and integration technology investing, including COTC conversions. ⁶

An key example of this is the recent investment in COTC technology by S-Oil, a South Korean refiner under the ownership of Aramco. Such initiatives are expected to set a precedent for numerous upcoming endeavors. It is anticipated that there will be a significant rise in COTC capacity, with an expected addition of 6 million barrels per day (b/d) by 2050.⁷

Decarbonization Attempts and Reduced Fossil Fuel Dependency

Mainly kickstarted by investors and policymakers who are sensitive to ESG-related topics, companies are looking for alternatives to fossil fuels and are investing in technologies that will help to reduce overall greenhouse gas emissions, aiding in the fight against climate change.

Worldwide trends in increased e-mobility, home office working, and the desire for greater fuel efficiency reinforced this idea and decreased fossil fuel consumption. To stay competitive, refiners are looking into ways to reposition themselves and use existing equipment in new ways.

This is being managed through a number of strategies such as investments in refinery-petrochemical integrations, fluid catalytic cracking (FCC) optimizations (petroFCC) for increased propylene yield, propane dehydrogenation (PDH) investments requiring relatively smaller capitals and heavy investments for COTC technologies.^2,8

Expanding Use of Bio-Based Streams and Co-Blending

There is an increase in the petrochemical industry in adopting bio-based streams and blends to reach sustainability goals and limit dependence on fossil-based feedstocks. With this, the use of bio-feeds and waste plastic pyrolysis oils is on the rise worldwide.

Heavy feeds are also being used to address profitability concerns, though product quality requirements and volatile markets may still drive the technical and economic feasibility of feedstock switching. This highlights the importance of detailed characterization, impurity analysis, and group-type analysis of heavy oils and newly emerging feedstocks.

Emerging Needs of the Market

As a result of the trends that are heavily driving the players in their daily operations and future investment decisions and the strong forces shaping the market, several current and future needs stand out.

Those who are willing to participate in a sustainable future and are committed to ensuring long-term success in the circular economy are strongly encouraged to investigate the following:

1. Build economically and technically advantageous business models that yield increased profitability without exclusively limiting compliance efforts with stringent regulatory requirements of the circular economy.^10,11,12
2. Develop sustainable and renewable feedstocks so as to increase profitability and decrease the CO₂ footprint.¹³
3. Improve infrastructure for better collection of plastic waste.²
4. Advanced mechanical and chemical recycling technologies for collected waste.²
5. Improve collaborations to create effective recycling systems and develop sustainable end markets that support the industry’s long-term viability.¹⁴
6. Push innovation to address existing challenges in chemical recycling processes, with an aim to optimize uptime and, as a result, maximize efficiency.

Image Credit: PAC L.P.

Embracing Circular Economy: The Petrochemical Industry’s Response to Emerging Needs

While the whole oil and gas market is transitioning towards a circular economy, the petrochemical industry is facing even larger challenges caused by conflicting forces. Over the past fifty years, plastic production increased tenfold, exceeding GDP growth three times.²

There are continued heavy investments in both growth regions (Asia and the Middle East) and developed countries (the US, initiated by cheap shale gas).^15,16 In addition, the EU and US use up to twenty times as much plastic and up to ten times as much fertilizer per capita versus developing economies like India and Indonesia.² This means there is massive potential for global growth in the near future.

Alternatively, there is a strong need for circular economy initiatives within the petrochemical industry to minimize waste generation, address environmental concerns, and enhance resource efficiency. Renewable streams and plastic recycling are two essential focus areas within the circular economy framework.

a.) Renewables

Renewable feedstocks, including agricultural waste, biomass, and algae, are becoming increasingly prominent as potential alternatives to fossil-based feedstocks. Renewable feedstocks are convertible to bio-based fuels or chemicals through innovative processes, providing a reduced carbon footprint and better sustainability profiles.^2,17

b.) Plastic Circularity

Plastic recycling is crucial to the petrochemical sector's circular economy. Advanced recycling technologies, such as mechanical and chemical recycling, are in development and being deployed to maximize valuable resource recovery in plastic waste. This assists in reducing virgin plastic production, conserves resources, and mitigates environmental pollution.

Ready-to-use solutions for plastic circularity are currently on offer from players such as Rewind by Axens, NewHope by Lummus, ChemCycling by BASF, Upcycle by UOP, and MoReTec by LyondellBasell.

The petrochemical industry is also active in exploring collaborations and partnerships with stakeholders throughout the value chain to create effective recycling systems, improve infrastructure, and develop sustainable end markets for recycled plastics.¹⁸ These initiatives contribute to waste reduction and also encourage a resource-efficient petrochemical ecosystem.

It is also critical to agree on the terminology. In a quickly evolving world, coming up with new terms is common. Even though all sustainable efforts will not be circular, circular economy offerings will help build a more sustainable future. Some offerings may even provide revolutionary green economy solutions.¹⁹

PAC Approach: Aligning Core Products with Strategic Choices to Meet Market Needs

PAC assists customers in achieving profitable growth. PAC solutions enable customers to increase their efficiency and uptime. This is achieved by helping our customers analyze heavier feeds in integrated refineries and crude-to-chemical plants, including the analysis of co-processed bio-streams at petrochemical FCC and steam cracking units.

In addition, they have improved their state-of-the-art purity analysis solutions to have low detection limits, which ensures product quality when newly emerging feeds are processed.

PAC also believes in helping the planet through the support of circular economy initiatives. These selected streamlined product offerings offer distinct advantages for those willing to take on tough challenges for the analysis of waste plastic pyrolysis oil.

PAC’s broad product portfolio covers the analysis of aromatics, olefins, emerging feedstocks, and chemicals. Custom-designed solutions provide increased efficiency and uptime by addressing:

• Group-type analysis up to carbon number 30 (C30)
• Speciated or complete sulfur & nitrogen (S&N) elemental analysis in the laboratory and at process
• Innovative distillation offerings in the laboratory and at process offering process optimization opportunities
• Customized GC offerings provide purity analysis of aromatics and olefins.

References and Further Reading

1. S&P Global. Global Downstream Market Outlook, Annual Strategic Workbook – 2023
2. International Energy Agency. (2020). The Future of Petrochemicals. Retrieved from https://iea.blob.core.windows.net/assets/bee4ef3a-8876-4566-98cf-7a130c013805/The_Future_of_Petrochemicals.pdf
3. Plastic Atlas: Facts and figures about the world of synthetic polymers. (2020). Heinrich Böll Stiftung. Available at: https://ps.boell.org/sites/default/files/2020-09/Plastic%20Atlas%202020%20-%20English.pdf (Accessed 03 August 2023).
4. Vityuk A, et al. (2023). [Online] Purifying and upgrading of waste plastics pyrolysis oils. Digital Refining. Available at: https://www.digitalrefining.com/article/1002944/purifying-and-upgrading-of-waste-plastics-pyrolysis-oils (Accessed on 18 July 2023).
5. United Nations Environment Assembly of the United Nations Environment Programme. (2022). Resolution adopted by the United Nations Environment Assembly on 2 March 2022. Available at: https://wedocs.unep.org/handle/20.500.11822/39744
6. Kumar B, et al. (2021) Biomass-based biorefineries: An important architype towards a circular economy. Fuel. https://doi.org/10.1016/j.fuel.2020.119622.
7. Bantillo P. (2023). S Korea’s S-Oil begins building $7bn crude-to-chemicals Shaheen project in Ulsan. ICIS. Available at: https://www.icis.com/explore/resources/news/2023/03/10/10864448/s-korea-s-s-oil-begins-building-7bn-crude-to-chemicals-shaheen-project-in-ulsan/ (Accessed on 03 August 2023).
8. Wu Q, et al. (2023) Acidic and basic catalytic cracking technologies and its development prospects for crude oil to chemicals. Fuel. https://doi.org/10.1016/j.fuel.2022.126132.
9. Increasing Your Profitability in the Petrochemicals Market through State-of-the-Art Laboratory & Online Measurements. [Webcast] ON24. https://event.on24.com/wcc/r/4142705/2198D9F17A4703E840ACFCA0184CEBD2?partnerref=Web
10. CleanEnergy.Gov. (2023). Building a Clean Energy Economy: A Guidebook to the Inflation Reduction Act’s Investments in Clean Energy and Climate Action. https://www.whitehouse.gov/wp-content/uploads/2022/12/Inflation-Reduction-Act-Guidebook.pdf
11. Ekins P, et al. The Circular Economy: What, Why, How and Where. Managing environmental and energy transitions for regions and cities. Background paper for an OECD/EC Workshop on 5 July 2019 within the workshop series “Managing environmental and energy transitions for regions and cities”, Paris. 
12. World Economic Forum Annual Meeting. (2019). It’s time for the circular economy to go global - and you can help. Available at: https://www.weforum.org/agenda/2019/01/its-time-for-the-circular-economy-to-go-global-and-you-can-help/ (Accessed on 03 August 2023).
13. Pfaltzgraff LA, et al. (2014) Green chemistry, biorefineries and second generation strategies for re-use of waste: an overview. Advances in Biorefineries. doi.org/10.1533/9780857097385.1.3
14. Kleine Jäger J, et al. (2021) Collaborations for circular food packaging: The set-up and partner selection process. SustainableProduction and Consumption. doi.org/10.1016/j.spc.2020.12.025
15. Hellenic Shipping News Worldwide. China to dominate upcoming petrochemical project starts in Asia through 2027, says GlobalData. Available at: https://www.hellenicshippingnews.com/china-to-dominate-upcoming-petrochemical-project-starts-in-asia-through-2027-says-globaldata/ (Accessed on 03 August 2023).
16. https://www.americanchemistry.com/chemistry-in-america/news-trends/press-release/2022/us-chemical-industry-investment-linked-to-shale-gas-tops-200-billion
17. Mathur S, et al. (2022) Alternative Fuels for Agriculture Sustainability: Carbon Footprint and Economic Feasibility. AgriEngineering. https://doi.org/10.3390/agriengineering4040063
18. Interplas Insights. Recycling Partnerships News [online]. Available at: https://interplasinsights.com/plastics-environment-news/plastics-recycling-partnerships (Accessed on 18 July 2023).
19. Hope B. (2022). What makes a circular economy circular, rather than green? Sustainability. Available at: https://sustainabilitymag.com/sustainability/what-makes-a-circular-economy-circular-rather-than-green-sustainability-supply-chain (Accessed on 03 August 2023).
20. PAC. Elements. Available at: https://info.paclp.com/elements (Accessed on 03 August 2023).

This information has been sourced, reviewed and adapted from materials provided by PAC L.P.

For more information on this source, please visit PAC L.P.