Producers in Europe are challenged to either shape up or ship out. Some companies are building physical and technical capabilities to drive their costs down
In opening up a very clear competitive advantage for chemical producers, the shale revolution in the US might also be expected to spur feedstock innovation in Europe and other parts of the world.
China has its vast coal deposits and there is plenty of analysis demonstrating that integrated coal-to-olefins (CTO) variable costs (feedstock costs and utilities) are among the lowest in the world in terms of olefins produced.
Producers in Europe are challenged to either shape up or ship out. Some companies are moving further away from commodities.
Coal gasification could be key for the UK
Copyright: Rex Features
Over time, different approaches to processing some new and some certainly not-so-new feedstocks could transform the industry. In the UK, the present government’s drive to recognise the role of manufacturing in the economy can clearly include chemicals.
The sector has grasped the opportunity to make its case for more welcoming business and energy policies.
Priorities for the country’s Chemistry Growth Partnership (CGP) which has been set up to address a range of issues important to the industry include energy, feedstocks, innovation and the supply chain.
The UK government recently spelled out its intention to further encourage the development of Britain’s not inconsiderable shale resources. Having seen what shale can do for the US, Germany is also expected to allow hydraulic fracturing sometime next year.
In the UK, shale gas might make an impact on the sector, helping to reduce energy costs and supplying additional feedstocks. Unconventional gas generally, however, could have a far greater impact.
The technologies are available to exploit the UK’s significant coal reserves, with coal gasification and C1 chemistry providing fuel and chemical feedstock. Clever exploitation of these hydrocarbon reserves in an environmentally acceptable way could significantly raise domestic chemicals and manufacturing competitiveness.
The UK could compete on a global scale based on its shale and coal gas resources, CGP member Paul Booth said. Booth is chairman of SABIC UK Petrochemicals and currently honorary president of SCI (Society of Chemical Industry).
The CGP thinking very much revolves around the use of synthesis gas in chemicals production closely linked to advanced manufacturing. The synthesis gas could be produced from shale gas, coal gas or from biomass or waste.
The chemical supply chains that have been broken in the UK and which have led to a decline in the sector’s output over the past few years are there to be reconnected, Booth believes.
“We’ve got to connect these in a way they weren’t connected before,” he said.
Looking at how some of these supply chains, from resource through to manufacturing, might be developed in a practical and pragmatic way is part of the CGP’s remit.
It expects to work with government to support policies that enable the safe exploitation of unconventional gas, biofuels and waste. Some form of carbon capture and storage for use on an industrial scale has to be considered.
The outcome could change the ways in which the industry works. “The UK potential for unconventional gas could be the equivalent of twice that of North Sea (conventional) gas – reducing dependence on imported gas and improving the business case for investment in the UK chemical industry,” the CGP said.
If a national network could be established, as much as 12m tonnes of biogas could be exploited by sectors such as chemicals. Small scale gas-to-liquids (GTL) technology might provide a route to fuels and chemicals. There are already innovative processes and businesses turning domestic waste into biofuels and plastics into aromatics.
Unconventional gas is seen as central to the future supply of energy and feedstock for chemicals manufacture in the UK and importantly as a bridge to more widespread use of renewables.