03 October 2011 00:00 [Source: ICB]
| "I think there is a global consensus about the growth of bio-based chemicals in the next 5-7 years" |
EPCA board member/CEO, Polimeri Europa
Europe's producers are realizing that bio-based chemicals offer an opportunity to compete in the rapidly developing global industry. More and more players are investing in technology and plants to utilize renewable feedstocks.
Europe is a region in transition. Under pressure from thriving Asian and Middle East markets, ageing assets and the lingering effects of the global financial crisis, petrochemical players in Europe are being forced to adapt to an increasingly competitive business environment. The sustainability megatrend and increasing viability of bio-based chemicals are therefore providing an opportunity to evolve and build for the future.
Although volumes are still comparatively small, chemical companies are eyeing bio-based materials to reduce their exposure to high raw material costs and compete with more advantaged markets, says Daniele Ferrari, CEO of Italy's Polimeri Europa, part of Eni Group, which is represented on the EPCA board.
"European companies are starting seriously to reconsider their strategies. It's clear that the economics for a petrochemicals unit benefitting from stranded hydrocarbons in Saudi Arabia or anywhere in the Gulf clearly has huge benefits. This phenomenon will continue and the pressure will continue for European companies," says Ferrari.
"They need to think about innovation and the ability to create an alternative source of raw materials to remain at the forefront of the industry. Of the top 10 chemical companies in the world, half of them are European; that's because they are continuing to innovate and spend on research and development," he says.
Polimeri Europa is completely revising its strategy and focusing on technology, globalization and sustainability, adds Ferrari. In May, the major petrochemical player signed one of the biggest and most ambitious projects of its kind: a 50:50 joint venture with Italy's bioplastics producer Novamont to build and manage a €500m ($704m) biorefinery at its Porto Torres petrochemical facility in Sardinia.
This will see the closure of its 250,000 tonne/year steam cracker - one of the oldest in Europe - as well as its downstream aromatics and polyethylene (PE) units. In its place, a new 350,000 tonne/year bio-processing complex will be built to tap into this growing market. The project is due onstream in 2013-2014 and will include seven bio-based production units capable of producing monomers, polymers, lubricant additives and fillers.
"It allows us to convert an uncompetitive site, maintain the level of employment and move into an area that we can see is very promising," says Ferrari. "I think there is a global consensus about the growth of bio-based chemicals in the next 5-7 years; it's a trend that we're not the only ones keen to pursue.
"We are not the only company in Europe that has existing infrastructure in places where there wouldn't be a chemical plant built today. We all have production that struggles to justify continued operations. One business model is to develop these facilities to make them sustainable for the future," he adds.
Although Asia, and specifically Thailand, continues to lure most players planning new bio-based facilities, Ferrari says that Europe will also be home to many upcoming projects. Italy, in particular, is rapidly becoming a hub - with players such as Dutch health, nutrition and materials firm DSM, France's Roquette and US-based Cereplast and Genomatica having announced plants there in the past year.
Ferrari suggests there are several reasons for the focus on Italy. With the country subject to some of the highest energy costs in Europe and having no access to an ethylene or propylene pipeline network, there is an increased incentive to innovate and propose alternative projects, he says. There are also plenty of uncompetitive chemical sites in the country sitting idle that still have decent infrastructure and are ideal for conversion.
"This is about evolution; it's about adapting to compete and continuing to innovate but not forgetting traditional chemistry. At the end of the day, we definitely have a duty to be sustainable in what we do. The bio-materials sector is going to be rewarding for chemical companies in the future and provide opportunities to change the perception of our industry," he says.
"In the past, there were green processes and technologies that were considered very expensive - but this is improving, partly because of economies of scale. The bio-route is getting far more competitive compared with the traditional fossil fuels.
"There is no doubt that the petrochemical industry will continue to be based on crude oil and there are many pressures. Crude oil is not going to get a lot cheaper; I would envisage crude more likely at $150/bbl before it reaches $60/bbl again, so the incentive to continue to develop bio-chemicals are there," says Ferrari.
"I believe there is a traditional part of the industry that will continue to rely on fossil fuels, but I could see that over the next few years, about 20% could be dedicated to bio-based growth in Europe. Today, including biofuels, that total is about 5%. We're talking about demand growth of around 15-20% annually," he says.
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