MOSCOW (MRC) -- Global petrochemical demand will continue to grow but as more recycled material is used as a feedstock in production, support from the sector to the upstream oil and gas industries seems to be limited, industry experts said during a panel discussion at the Asia Pacific Petroleum Virtual Conference, or APPEC 2020, on Sept. 15, said S&P Global.
We are not going to see any peak in the near future," Maria Victoria Zingoni, executive managing director of commercial businesses and chemicals, chairwoman of Repsol Electricity and Gas, said during the discussion.
Nevertheless, industry experts believe that the way of producing petrochemicals in the future will be changed dramatically, providing limited support to the upstream oil sector.
"Today, we have a virgin feedstock ratio of about 98%, so nearly all of the feedstock to petrochemical is coming from new sources....There will be definitely more recycled feedstock getting into the value chain. There are studies by consultants saying that this ratio will increase to 60% in the long term. So the trend is definitely, and it has to be, towards circular economy," said Michael Spitzbart, vice president for crude and risk management at OMV Downstream GmbH.
Plastics recycling is undoubtedly a trend that will continue as many global majors have committed to using recycled plastics in their various packaging applications, Mathew George, head of petrochemical exports at Indian Oil Corporation, said during the panel discussions. Meanwhile, there is a lot of new petrochemical capacity coming online in Asia and the Middle East.
"It could lead to a problem of temporary oversupply of virgin materials, however...I don't think that's going to impact the pricing of virgin products substantially," George said, adding that there is unlikely to be price-driven competition between virgin and recycled products producers in the long term.
"The fossil fuel feedstock for petrochemical stands for less than 10% [of total oil production. I guess it is in the range of 5-8%. So petrochemical will not eat up the full amount of demand loss of oil," Spitzbart added.
"Based on Analytics view, it is probably that oil demand, excluding petrochemicals, will peak by the end of this decade. But petrochemicals will add to the demand, so meeting the peak oil is perhaps more towards the back end of the 30s or early 40s," said Chris Midgley, global director of Platts Analytics.
Ethylene and propylene are feedstocks for producing PE and polypropylene (PP).
According to MRC's ScanPlast report, Russia's overall PE production totalled 1,712,400 tonnes in the first seven months of 2020, up by 58% year on year. Linear low density polyethylene (LLDPE) accounted for the greatest increase in the output. At the same time, overall PP production in Russia increased in January-July 2020 by 24% year on year to 1,063,700 tonne. ZapSibNeftekhim accounted for the main increase in the output.
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