There is an increasing need for diversification in the oil industry. Oil producers increasingly turn to petrochemicals for growth, used in plastics, packaging, textiles, automotive, and construction sectors.
FREMONT, CA: The oil business must increasingly diversify. Petrochemicals are a primary growth sector for oil producers, with value chains extending into plastics, packaging, textiles, automotive, and construction industries. Yet, to fully capitalize on the opportunity, market participants require accurate information about the varying potential of various feedstocks.
The evolution of a broad regional feedstock supply mix
The energy shift changes oil supply and demand, substantially affecting the petrochemical industry. As global liquids' energy consumption drops dramatically in 2027, non-energy consumption will continue to increase through 2040. This will push many refiners towards downstream integration, with petrochemicals becoming a significant alternative demand source.
American supply growth will decelerate, particularly for ethane, propane, and butane, while Middle Eastern supply growth will be balanced in the future. As a result, the rise of LPG and naphtha supplies in Asia will be crucial to sustaining the rising global demand for olefins and aromatics, with trade flows shifting to accommodate supply and demand imbalances.
Olefins feedstocks are diminishing, yet supply may struggle to keep up with demand
In the past decade, olefins feedstocks have diminished in weight. The use of natural gas liquids (NGLs) has increased at the expense of naphtha and other liquid feedstocks.
The demand for NGLs will continue, but the supply may need help. If NGL supply growth pauses, the present surge of investments in gas-based olefins may abate. In the future, liquids-based steam cracker capacity may increase, necessitating an increase in liquid feedstock from the refining system.
The margin advantage of gas-based feedstocks could diminish
Nowadays, gas-based feedstock has a margin advantage over liquids. Yet, supply constraints in ethane and LPG could eventually erase the price disparity. This would eliminate the motivation for future investment in gas-based production and raise the question of whether gas-based ethylene producers should hedge by investing in steam crackers fueled by liquids.
In evaluating the future of petrochemical feedstocks, it is essential to consider that the increased emphasis on a circular economy will affect the demand growth of numerous polymer value chains. Petrochemical Feedstocks Long Term Service provides a bottom-up analysis of future polymer demand by sector, translating it into the need for corresponding feedstocks' base chemicals.
