Integrated oil and chemical producers such as Anglo-Dutch Shell can make good money out of petrochemicals if they can capitalise on their in-built feedstock advantage.
This was the key message from Shell executives at a media briefing I attended this week in London. The company has subtly changed its chemicals strategy away from the previous “cracker plus one” derivative concept towards becoming a “highly profitable
upgrader of hydrocarbons.”
Executive vice president of chemicals, Ben van Beurden, said that the cracker plus one concept was useful for when the company was going through its portfolio rejuvenation process. Now that this is largely completed, Shell will move on with a new focus to capitalise on its feedstock advantage. “Everything we do must help us to hold on to that feedstock advantage. Don’t give it away by producing second-class assets or in the wrong geography,” he said.
Now that rationalisation has given it a more high quality refining footprint, Shell is trying to integrate its chemicals operations more cleverly, adding scale and complexity so that a wider variety of feedstocks can be used producing a flexible product portfolio.
For example, Europe Shell might boost the use of hydrowax – which is of low value for fuels – as a feedstock for high value petrochemicals. In the US, feedstock advantage means continuing the shift towards greater use of ethane. In 2007, Shell cracked around 70% liquids compared with 25% in 2010.
And globally Shell is examining how it can make better use of methane and syngas. “We’re investing a lot of time in methane to chemicals,” said van Beurden. Shell is also examining new routes for coal to chemicals and is interested in developing bio-based feedstock
With demand for transport fuels in mature economies expected to decline, it is more important than ever for integrated firms to have flexible assets that can switch towards chemical production, he told us, adding: “Chemicals are an important enabler for upstream value chains.”
By focusing so heavily on feedstocks, “we have the aspiration of becoming more profitable than the average at Shell. We have discovered a whole seam of feedstock advantage.”
Van Beurden warned that Europe’s chemical sector would thrive only if it was not damaged by its regulatory environment. He said the Emissions Trading System is a major concern but he is hopeful a workable solution can be found