Chemicals to Become the New Frontier for Energy Demand Post-2020
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Chemicals to Become the New Frontier for Energy Demand Post-2020

Chemicals to Become the New Frontier for Energy Demand Post-2020

Considering the global coronavirus pandemic resulting in travel restrictions and many industries grinding to a halt, global petrochemical demand will fall seriously in 2020. However, chemicals shall become the new frontier for oil demand post-2020. A combination of smart chemistry and innovation is key to adding value.

In its latest research report, the Al-Attiyah Foundation studied the short-term market uncertainties, oil pricing volatilities and the acute need for certain petrochemical products whilst others diminished. Oil-based petrochemicals integrated with refining will make a comeback, versus gas-based, due to the overhang of cheaply priced crude and condensate, and the greater diversity of outputs. Nevertheless, the cheapest route to ethylene and its polyethylene derivatives is via ethane cracking. Here, those gas producers who have rich wet gas will retain their competitive advantage.

Post-crisis, the rate of growth for transportation fuels will continue to decline, causing refining companies to put more emphasis on their petrochemical strategies. Producers with access to low-cost oil and gas assets will need to better monetize their assets by seeking a higher conversion per barrel of oil into chemical products. Increasing focus on capital and construction efficiency, best process configuration, and full use of digitalization and automation technologies will protect profitability. In the future, emerging market producers will back-integrate petrochemical projects for their captive use, which could limit availability to export markets.

Technology competitiveness – carbon capture and utilization, artificial intelligence (AI), big data analytics – will favor technology licensors that can convert oil and gas-based feedstocks to produce the maximum chemicals with the fewest utilities and the least waste gas production.

Environmental pressures, post-2020, on petrochemical use in advanced economies, will force exporters to adapt, reducing carbon footprint, improving energy efficiency, and moving towards the circular economy.

Petrochemicals are currently challenged by the Covid-19 crisis, like most parts of the hydrocarbon business. However, they will still be key to future oil demand growth. This prospect is now solidly established, meaning that most national oil companies (NOCs) and several large international oil companies (IOCs) are already focused on this area. With the fall in oil and gas prices and the full allocation of advantaged feedstock greatly reducing the competitive advantage of certain geographies, new petrochemical investments will have to be predicated much more on capital and operational improvements and market responsiveness.

The full Research Paper will be available to download from the Foundation’s Website at www.abhafoundation.org

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