Shell commits to growing chemicals as part of low-carbon strategy

Author: Will Beacham

2021/02/11

BARCELONA (ICIS)--Shell on Thursday committed to growing its chemicals business, setting targets for the division as it transitions the company towards net carbon neutrality.

In a strategy update, the company’s CEO Ben van Beurden laid out targets to increase cash generation from chemicals by $1-2bn/year and reduce exposure to commodity chemicals by around 70% by 2030. He also reiterated a target to process 1m tonnes/year of plastic waste for recycling by 2025.

Van Beurden said the company’s aim – announced in the third quarter of 2020 – of reducing its portfolio of 14 oil refining sites globally to six energy and chemical parks by 2030 is well underway through the divestment and closure of some assets.

The company said previously the six sites will be located mainly around the US Gulf Coast, northwest Europe and Singapore.

Shell sees chemicals as a growth business because they create the products that will help drive the transition to lower carbon intensity energy and transport. This ties in with Shell’s own target to become a net zero carbon emissions energy business by 2050 or earlier. The company gave more details on how it would achieve this in today’s strategy update.

On chemicals, the CEO said: “We see chemical demand continuing to grow, outpacing GDP, because chemicals are found in all aspects of modern life and are the building blocks of the future energy system. So we will continue to grow our chemicals business with a focus on intermediates and performance chemicals.”

Van Beurden said these are the areas where Shell has competitive advantages in technology, scale and market access. He believes the move to sustainable and performance chemicals will bring Shell closer to the end customer.

“It will help us evolve our portfolio from commodity chemicals to products that are priced on the value they bring to the end consumer. In this way we start to delink our business results from the commodity cycle, reducing our exposure by around 70% by 2030.”

He added: “Between our opportunities to increase margins and the options we have to invest for growth we will increase chemicals cash generation by $1-2bn/year by 2030.”

In 2020, Shell generated cashflow from chemicals operating activities of $1.67bn.

Van Beurden mentioned chemicals projects at Pennsylvania, in the US, and at Nanhai in China.

At Monaca in Pennsylvania, Shell is constructing an ethane cracker and polyethylene (PE) project with 1.6m tonnes/year of ethylene capacity and 1.6m tonnes/year of PE capacity, according to the ICIS Supply & Demand database. It is due onstream this year.

At Nanhai, China, Shell operates a 2.2m tonne/year ethylene cracker and downstream units as part of a 50/50 joint venture with CNOOC Petrochemicals Investment. The partners plan to further expand the site by adding a new 1.5m tonne/year ethylene cracker.

RECYCLING BOOST
It is not yet clear how Shell plans to meet its ambitious target to process 1m tonnes/year of plastic waste for recycling by 2025. Lack of available feedstock can be a challenge for developing and scaling up mechanical and chemical recycling.

Shell already has some recycling projects underway, including at its Rheinland, Germany site, which houses the largest refinery in Germany and is integrated with chemicals. Here, Shell aims to use recycled feedstocks such as plastics waste, increase the use of biofuels and produce sustainable aviation fuel onsite.

In November 2020, Shell announced a supply agreement with US-based Nexus Fuels for the supply of pyrolysis oil made from plastic waste.

Nexus Fuels will supply Shell with 60,000 tonnes of pyrolysis liquids over four years, which will be converted into chemicals. The deal builds on an existing collaboration under which Shell’s chemical plant in Norco, Louisiana, used Nexus' pyrolysis liquids in a liquid cracker to make chemicals.

Front page picture: Shell's facilities in Pernis, the Netherlands
Source: Robin Utrecht/Shutterstock

Focus article by Will Beacham

Additional reporting by Joseph Chang