FocusUK chemicals industry at a crossroads post-Grangemouth

30 October 2013 12:57  [Source: ICIS news]

NEW YORK (ICIS)--The UK government and industry need to cooperate to save the UK chemical sector as it struggles with a deteriorating feedstock position and poor downstream demand, according to two consultants.

In an article to be published in the 2 December edition of ICIS Chemical Business, David Jones of Industrial Commercial Ventures and George Smith of Hurst Park UK argue that the UK’s chemical industry faces a bleak future unless steps are taken to tackle feedstock availability, particularly ethane from the North Sea and US.

The authors point out that the US feedstock advantage from shale gas will result in increased exports of petrochemicals to Europe. “By 2017, ten million tonnes per annum of incremental ethylene capacity (a 38% increase versus today) will create US exports of petrochemicals that will weigh hard upon the European petrochemical industry.”

In the aftermath of the industrial dispute which almost resulted in the permanent closure of the INEOS petrochemical works at Grangemouth, they argue that for the UK industry to retain critical mass, it must work with government to foster collaboration between stakeholders such as North Sea feedstock suppliers and infrastructure owners. The government should also consider providing direct loan guarantees, grants or indirect assistance through tax breaks, they say.

There are three major ethylene production sites in the UK; ExxonMobil/Shell Mossmorran, SABIC Wilton and INEOS Grangemouth. Crackers at the latter two sites are integrated into on-site derivatives. Sites in the North West and Humberside, also depend upon supply from these crackers.

The authors say: “The UK industry has seen better days but it has an endowment of assets that could – if supported – continue to have a future. Specifically, the UK is unique in Europe in having two (Mossmorran and Grangemouth) of the four European crackers designed to consume material quantities of ethane.”

Grangemouth and Wilton are also capable of consuming locally-supplied propane, butane (liquefied petroleum gas) and condensate, they say, adding: “It is likely that the Wilton cracker could consume ethane with relatively limited modifications to the current design.”

The authors suggest there is a case for investing to improve the UK’s pipeline infrastructure for chemical feedstocks so that ethane can become more widely available, improving the cost position of the industry there.

They pose six questions which need to be considered in a debate about UK chemical feedstock strategy:

  • If the UK provides support to the petrochemical industry, where is this most effectively applied?
  • Are there better solutions if the key upstream and downstream player could collaborate better?
  • Does competition law restrict co-operation and is Governmental action needed to create the environment for collaboration across the petrochemicals industry?
  • What options and impediments are there to recovering more feedstock from the North Sea streams?
  • How could the UK become the destination of choice for excess US petrochemical feedstock?
  • In the Doomsday scenario, what are the implications of a closure of one or more UK petrochemical sites upon the distribution of existing North Sea hydrocarbons?

 


By: Will Beacham
+44 20 8652 3214



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