The Oil Industry is Turning to Petrochemicals

Posted on 07-09-2018, by GBC

Image source: Wood Mackenzie

The oil industry is turning to petrochemicals for long term growth as vehicle efficiencies and electrification render transportation a declining market. Of course, petrochemicals often means ‘plastics’ and with the sustainability spotlight shining brightly on this area, what impact will environmental strategies to reduce or ban plastic consumption have on long-term oil demand growth?

Resolving this complex and increasingly sensitive issue will be challenging. The starting point to understanding the implications for natural resources and the environmental consequences of shifting away from plastics must be: if not plastic – what? And reviewing the entire supply chain is essential otherwise the issue of environmental impact will simply surface elsewhere.

Plastics are favoured by many because they are incredibly efficient and cost effective but finding alternative solutions for their many uses is going to be complicated, problematic and expensive requiring a commitment from the public, brand owners and governments. This will take time.

A circular plastics economy could lessen the impact of disposal while having minimal impact on chemical demand growth due to rising incomes, populations and living standards. It is important to note that waste management is a major problem, primarily in developing countries, and better management would go a long way in addressing plastics waste in the oceans and the negative public perception. So although the rate of growth (in percentage terms) will be lower than we’ve seen, it’s still growth stemming from an ever expanding base so the volumes are quite sizeable.

Ethane will capture the majority of this, and, along with naphtha, will remain the primary feedstock for petrochemicals and plastics. And the chemical industry will continue to grow requiring continuous investment. By 2035 chemicals will account for almost all oil demand growth. Approaching 2040 our forecast shows chemicals being almost 20% of total oil demand.

Wood Mackenzie insight, A circular plastics economy: long on intentions, short on solutions, addresses the difficulties and complexities of banning plastics. While Wood Mackenzie advocate recycling and strongly believe it will grow at a very fast pace it is starting from a low and it is also facing hurdles. The insight summarizes the major issues surrounding plastics and the impact it will have on chemical demand growth to 2035 plus the effect it has on oil and chemical feedstock demand.

Read the insight on Wood Mackenzie website