For petrochemical producers making capital investment decisions today, the management of carbon dioxide emissions may be as important a consideration as feedstock advantage, production technology, market access and integration, says Mark Eramo, global head/fuels, chemicals & resource solutions at S&P Global, as per Chemweek.
Eramo discussed the implications of the energy transition for petrochemical investment at the World Petrochemical Conference by S&P Global in Houston.
"Where can I be competitive? I would say that for the last 10 years, there's been a model of build low-cost and ship to high-demand regions," said Eramo. "Today we're saying that now there's a fifth consideration, and that is, how do I provide effective carbon management? How will that change the footprint over the next 10 years when it comes to the location strategy of petrochemical assets going forward? Maybe the model stays the same. Or does the fact that you need an effective carbon management strategy in order to get the financing you need or approval from the board mean that now your location strategy is going to have to be slightly different than it was in the past?"
Eramo said the petrochemical industry is committed to lowering carbon emissions. “That’s what we’re trying to get to and yet maintain that balance of economics, society, environmental stewardship, and meeting all the needs of our various stakeholders.”
However, doing so is "a global balancing act complicated by geopolitics," he told attendees. "It's about curtailing demand for high-intensity carbon energy while decarbonizing supply and then trying to build this green-energy economy of the future," he stated. "And probably the most important thing is that energy security and energy affordability are at the front of the line in creating this multidimensional energy transition dynamic."
A very large portion of the world's population remain eager to improve their living standards, and demand for energy and consumer goods will necessarily increase. "You have to continue to supply the growing needs of a growing population with the assets you've got on the ground," Eramo noted. "Those are hydrocarbon-based assets for the most part. So this balancing of capital to make my current assets profitable and meaningful while I try to transition to this cleaner greener energy-based future is the balancing act that these executives are facing."
Decisions around capital investment must balance the need for an energy transition not only with the broader needs of society but also the financial realities that place limits on the path and speed of progress.
"This set of assets has to be very profitable, and it has to fund the ability to get to this green future -- the ability to bring in renewable energy, to look at on-site electrification or go with carbon capture, to go with hydrogen, or deeper integration into chemicals. That hydrocarbon-based business has to be able to fund the cash flow that enables me to make the investments that get me to a lower carbon future."
Despite the complexities involved and the uncertainty that clouds the outlook, certain companies are "placing their bets," Eramo observed. "They're making assumptions and moving forward with significant investments." In November 2023, he noted, ExxonMobil entered the lithium market with the goal of achieving a top position by 2030; the same month, Air Products decided to proceed with a blue ammonia project in Louisiana; and in December 2023, Dow finalized plans to build a net-zero ethane cracker in Alberta.
"The pathway to net zero requires us to rethink business models and evaluate low-carbon inputs along with end-of-life solutions for consumer goods," said Eramo. Incentives will be more effective than penalties, he said, because they attract capital investment. "I also believe a more pragmatic approach makes good sense," he added, such as asking consumers to focus more on managing their own waste.
Eramo stressed the need for multiple solutions. "We have to have hydrocarbons for the consumer goods that enable modern living and advance the human condition," he continued. "Whether it's plastic or any other material, it's a question how you handle the waste stream, not the product itself. You can't continue to get the efficiency gains and the other advances that we've made just in the mobility sectors without plastics and engineering resins." He also argued for carbon pricing and markets. "I've heard this multiple times last year and this year: Give me a carbon price, and then let the industry run off that, and we'll make the decisions that we need to in terms of dealing with carbon," he said.
He expressed confidence that the petrochemical industry can drive the energy transition if allowed to do so.
We remind, the US Department of Energy (DOE) has selected ExxonMobil’s Baytown, Texas, olefins plant carbon reduction project to receive up to USD331.9 million in funding under the USD6-billion Industrial Demonstrations Program (IDP). The announcement comes one month after a report in the Houston Chronicle that ExxonMobil might have to cancel the project if proposed federal tax incentives for the production of clean hydrogen exclude the use of carbon capture and sequestration (CCS).
mrchub.com