The petrochemical sector continues to expand in size and importance. Developing nations’ demands for petrochemical products continue to increase and will likely continue to do so beyond 2025. The most significant demand comes from the Asia-Pacific region, the Middle East and the US. It is in these three regions that there is noted growth.
As well as the development in the supply chain, the Asian-Pacific region has also increased construction of petrochemical sites. Although these are capital intensive investments, with the integration of refining and petrochemical facilities, it is thought to increase efficiency and value. China accounts for almost half of these projects, with India in second place at 15% of the market share.
The Middle East continues to be a significant presence in the petrochemical sector. Countries in the Middle East are working to mitigate reliance on the revenue from oil exports. Therefore, there has been considerable progress in developing petrochemical plants. Saudi Arabia is leading this investment, as it seeks to triple capacity by 2030.
The shale gas boom in the US has given a boost to the US domestic petrochemical sector. The ready availability of shale gas allows the US to provide the lowest cost ethylene and ethylene derivatives. More than 70% of these projects are based in Louisiana and Texas.
By the end of 2020, it is thought that the investment in new ethylene capacity will reach $20bn. The ethane cracker investment could then bring investment in petrochemicals to $50bn.
Most important growth driver
According to Mckinsey Energy Insights, the petrochemical sector will be the most critical growth driver for oil demand. It is predicted that this sector will add four million barrels to demand by 2020 and 2030. Although there is a natural desire to use renewable feedstock for chemicals manufacture, it is still not viable for mainstream applications. It is just too expensive, though this may change by 2050.
Currently, the demand is only 15% of oil demand; it is likely to grow exponentially by 2030. The petrochemical sector will likely account for a third of all oil demand growth beyond 2030 and by nearly half as we head towards 2050. Despite recent environmental concerns, the product of key plastics is likely to double between now and 2050. It is the desire for plastics in the developing economies that will drive this most significantly.
In contrast to the petrochemical sector, other areas of oil and gas demand are likely to grow more slowly, such as the demand for petrol for road transport. This reduction in demand is a result of the efficiency made in vehicle engines, and the increased use of electric vehicles.
The short takeaway
For the oil and gas industries, the growth in the petrochemical sector is significant. It is likely to demand proportionally more oil supply into 2030 and beyond. The impact of the Asia-Pacific cannot be under-estimated, though US demand for self-sufficiency is also significant.
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