Key points
Products produced by petrochemical plants are indispensable to multiple sectors, and petrochemical businesses rely upon reliable and consistent outputs to remain competitive.
However, consistency has been much harder to achieve in recent years, thanks to multiple factors including rising energy costs, new legislation and volatile markets, threatening overall plant performance.
Craig Flemming, Sector Leader – Petrochemical and Refining at Aggreko, explores how this has affected utility provision within the sector and how industry stakeholders can mitigate potential disruption.
The European petrochemical sector has experienced ratcheting pressure since 2020, with fluctuating oil and gas prices driving up feedstock prices for every product[1]. Spiralling energy costs spurred by the Russia-Ukraine war have exacerbated this situation, affecting plant production levels and yield quality.
Though disruption in either area can affect the industry’s ability to remain as competitive as possible on the global stage, instability has been unavoidable. For a sector where consistent processes are paramount to best possible outputs, this is not an ideal situation.
An Increased focus on decarbonisation within the sector must also be considered, with plants expected to reduce emissions at a meaningful pace. Indeed, the European Union (EU) has set out an ambitious transition pathway in January 2023 covering R&D, regulations and infrastructure over the next 25 years[2].
But while this plan is comprehensive it does not address the immediate challenges affecting plant efficiency today, which in turn will hamper the profitability required to attract investment under the EU’s Green Deal[3].
Some businesses have looked to offset potential instability by passing overheads onto customers, yet this plan’s long-term durability can be questioned. Though the sector experienced record demand levels in 2021, McKinsey have noticed a continued slowdown, with declining integrated margins of petrochemical products. Instead, the consultancy has advised plant stakeholders concentrate on optimising processes and concentrate on ‘performance excellence’[4].
The European petrochemical sector has experienced ratcheting pressure since 2020, with fluctuating oil and gas prices driving up feedstock prices for every product.”
Power and Temperature Control
What this entails is up for debate, but better utility equipment procurement and maintenance is undoubtedly part of the conversation. Similarly, this will also help plant stakeholders reduce plant carbon footprints in line with European net zero and decarbonisation goals.
This can most clearly be seen in supplementary power provision. Though traditionally used to as an emergency backup to keep energy-intensive petrochemical production online pressure and relief systems stable, it has a role to play elsewhere in the plant.
Specifically, greener supplementary solutions can be used to increase site resilience, efficiency and sustainability, helping balance loads during periods of peak power demand or support turnaround procedures.
The same applies when considering the use of additional temperature control equipment within the plant environment. Cooling is vital to the transformation of crude oil and natural gas into end products, and precision is key to improving the volume, quality and profitability of site yields. But full accuracy cannot be guaranteed with older or obsolete plant, resulting in smaller margins and affecting the competitiveness of the European petrochemical sector.
Taking Soundings in the Sector
These issues and opportunities have informed Aggreko’s research into the industry for its two latest whitepapers, Process Matters. Together with independent research partner Censuswide, the company questioned over 600 process engineers working in in the UK, Germany, France, Belgium, the Netherlands and Luxembourg petrochemical industries on the operational challenges they face.
Tellingly, 80% respondents across all European markets mentioned that they were concerned that their current power equipment could impact refinery operations. This equipment was also five years old on average, with a significant number of units being even older.
These statistics, combined with findings that half of respondents are experiencing outages between three to ten weeks annually – almost 20% of the year – suggest clear opportunities to optimise and overhaul existing plant processes.
Additional concerns were raised when analysing temperature control provision, with 52% of engineers surveyed citing issues sourcing spare parts for cooling, heating, steam and compressed air equipment.
Given the need to adapt temperature control arrangements based on hotter or colder seasonal weather patterns, the advanced age of this equipment and the possibility of unplanned downtime may present plant stakeholders with potential challenges. Action is therefore imperative if processes, outputs and yields are to be maintained and improved.
The Will to Decarbonise
This research clearly demonstrates an awareness of ageing plant assets within the industry. Yet, a large proportion of sector engineers also expressed a will to decarbonise despite these current challenges. For instance, an overwhelming 95% of respondents said they were willing to pay 25-50% extra for greener power solutions, and a similarly emphatic 94% expected their suppliers to have a robust environmental and social responsibility strategy.
Considering that Europe-wide decarbonisation targets are likely to become more stringent as the 2050 net zero emissions deadline nears, this level of enthusiasm bodes well for the sector. It will also have huge ramifications on how power and temperature control equipment is procured going forward.
Namely, suppliers must be able to provide efficient and sustainable solutions in both the immediate and long-term future, especially given the trilemma of market volatility, pricing fluctuations and a shifting legislative landscape over decarbonisation.
“Tellingly, 80% of respondents across all European markets mentioned that they were concerned that their current power equipment could impact refinery operations.”
Ongoing Assistance
In such a climate, the outright purchase of power and temperature control equipment may lead to other issues later down the line. What works well today may not in the near future, and the risk of stranded or obsolete assets may be heightened in a business landscape where smaller margins have led to reduced budgets for permanent purchases.
Though there is clearly an appetite for positive change, capex is simply too restrictive to adequately manage rising energy costs, new green legislation and other market fluctuations. Yet standing still is not an option, as putting off action today may result in greater expense tomorrow.
Bridging solutions offer a possible way to reduce this pressure. Deploying power and temperature control equipment on a short to medium-term hire basis may provide plant stakeholders with the dynamism needed to address the shifting pressures affecting the PCR industry. Such volatility is difficult to forecast, and a modular, scalable approach to equipment provision may provide a way to adapt to changing market conditions.
With this in mind, it is pivotal petrochemical industry decisionmakers source suppliers that are investing heavily in the latest power and process control technologies. Additionally, ensuring extensive expertise should not only be a factor at point-of-purchase.
Accounting for the continuing pressure the petrochemical industry will face, leveraging this invaluable knowledge may give businesses an added level of assurance in even the most challenging of circumstances.
As underlined in Aggreko’s latest whitepapers, working in an ongoing partnership with an experienced external supplier could give businesses the best possible basis to remain competitive regardless of the business climate.
[1] Global oil and gas prices have been highly volatile – what will happen next? | Kenneth Rogoff | The Guardian
[2] www.single-market-economy.ec.europa.eu/sectors/chemicals/transition-pathway_en
[3] Europe turns up heat under chemicals industry to clean up its climate act | Reuters
[4] Excellence in petrochemicals | McKinsey
