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The European Petrochemical Industry in Challenging Times
Dorothee Arns, Executive Director Petrochemicals Europe
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1. Petrochemicals Europe – who we are
2. The chemical industry – facts and figures
3. It all starts with the crackers …..
4. The competitiveness challenge
5. The regulatory landscape
6. Summary
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Petrochemicals Europe – Who we are
= the association of petrochemical producers in Europe (formerly „appe“)
• An industry programme of Cefic
• 56 producers of base chemicals and derivatives
• 20 companies operating 52 of the 59 steam crackers in the EU28
• 40 units integrated with refineries
• 26.2 million tonnes of ethylene – 40 million tonnes of High Value
Chemicals (C2-C5)
• 20% of worldwide ethylene capacity (130 million tonnes)
• Total production; 150 million tonnes including derivatives
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Our VISION is for the petrochemical industry to be recognised as the
foundation of future economic success in Europe, fuelling innovation,
manufacturing and employment.
Our mission:
As the voice of the European petrochemical industry, we
Advocate for conditions that will allow the industry to operate successfully
in a highly competitive global environment
Raise awareness of the contribution of our industry to the European
economy which provides essential raw materials for thousands of
products produced by diverse industries, driving innovation and
creating employment
Engage continuously with all our stakeholders in the pursuit of
sustainable solutions.
Petrochemicals Europe – Vision and Mission
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Chemicals Market Size : global chemicals demand in value
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The EU Chemical Industry Structure (2013)
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Source: Petrochemicals Europe
Europe – home to petrochemical excellence
Source: Petrochemicals Europe
Europe’s chemical excellence is based on a variety
of value chains which originate from its steam
cracker base
Europe – home to petrochemical excellence
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59 steam crackers in operation in EU 28
Homogenous geographic coverage
Transform crude oil and natural gas into high value materials
> 80% of all value chains start from steam crackers
> 300,000 direct employees + huge multiplying effects
contribution to overall European GDP: 155,000,000,000 € (155 bn €)
Crackers´ derivatives and polymers provide sustainable
solutions to energy savings and confort such as insulation,
durable, light-weight and resistant composites, etc.
95% of all manufactured goods are based on petrochemicals, such
as electronics, furniture, appliances, textiles, and many more
Highly exposed to international competition (commodity business)
Highly exposed to energy and feedstock costs
Crackers initiate the value chains
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Global drivers EU Mid-East US Asia
• Crude oil & Feedstock costs
• Market demand
• World scale capacity plants
• Credit rate (Capex)
• Currency (€/$)
Regional drivers
• Energy costs
• Labour cost
• Regulatory costs
• Infrastructure
Operator specific
• Integration & client proximity
• Energy efficiency
• Feedstock flexibility
• Product portfolio (technology)
Strength Weakness Neutral
Competitiveness Drivers for Petrochemicals
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80% of manufacturing costs of petrochemicals are related to feedstock and
energy
85% of European crackers use naphtha as main feedstock
Units are capital intensive (2,5 to 4 billion €)
the price of both naphtha and natural gas remains correlated to the price of
Brent oil
in the value chain products derived from crackers are traded globally at a
market value set by global economics
Shale gas is a game changer for petrochemicals and creates substantial
opportunities for investments in the US
The Key Global Competitiveness Challenge –
Europe is losing ground
Ethylene Cash Cost of Regional Steam Crackers (US$/tonne C2)
Crude drop has brought some relief but only vs US
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Source: ICIS Consulting
All regions grew their cracker base
Source: ICIS Consulting
Ethylene production capacity – million ton per year
0
10
20
30
40
50
60
70
2005 2010 2015 2020
N. America
0
10
20
30
40
50
60
70
2005 2010 2015 2020
Middle East
0
10
20
30
40
50
60
70
2005 2010 2015 2020
Asia
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With ethane but also naphtha as feedstock
Naphtha remains dominant feedstock
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Source: ICIS Consulting
0%
20%
40%
60%
80%
100%
2010 2015 2020
Ethylene production by feedstock
Other Naphtha LPG Ethane
0%
10%
20%
30%
40%
50%
2010 2015 2020
Ethylene production by feedstock
Ethane LPG Naphtha Other
0
10
20
30
40
50
60
70
2005 2010 2015 2020
Europe
Except Europe
Ethylene production capacity – million ton per year
Source: ICIS Consulting
0
10
20
30
40
50
60
70
2005 2010 2015 2020
N. America
0
10
20
30
40
50
60
70
2005 2010 2015 2020
Middle East
0
10
20
30
40
50
60
70
2005 2010 2015 2020
Asia
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Declining cracker base
Europe is only region in the world where no new cracker capacity was built
this decade. On the contrary: by 2016, capacity will be reduced by almost
10% vs. 2008 peak
Source: ICIS Consulting
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25
26
27
28
2000 2005 2010 2015
million ton per year
European Ethylene Production Capacity
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Result: Employment declines
True impact larger due to multiplier effect
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The regulatory landscape
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Cumulated number of EU regulations on Health,
Safety and Environment (net of abrogation)
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Competitiveness Pros and Cons for Europe
Summary
Large integrated domestic market with strong customer industry clusters
High international orientation and global network to external customer industries
Until now availability of skilled and motivated workers and scientists
Continued strategic restructuring efforts (flexibilty to globalised markets)
Strong innovation efforts will generate new growth clusters: Efficient Energy use, health and new materials which could solve upcoming societal mega challenges
Low “new consumers” population growth in the EU => low demand growth for chemicals in general - elderly population, shrinking working age classes, high saturation levels.
High energy and feedstock costs vs Middle East and now the US => EU is facing an upcoming wave of petrochemical capacity additions, especially in Middle East and US
High Regulatory Compliance Costs (e.g. REACH, Seveso, IED, 7th EAP…)
Non-energy raw material availability and cost issues (eg. biobased feedstock, rare earths, minerals)
Lack of a “Common Industrial Policy” or a “Common Energy Policy”
a „walk the talk“ approach is urgently needed from EU politicians!
Crackers (olefins & aromatics) intimately connect with the
value chains, you can’t have one without the other
Europe’s Petrochemical industry is a house of cards
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Thank you for your attention!
Please visit us at
www.petrochemistry.eu
and at our table outside …
… or follow us on : /eupetro