Swings and roundabouts for the petroleum industries

Swings and roundabouts for the petroleum industries

While returns from fuel sales may decline, downstream petrochemical products and plastics are in demand.

There are not many outside the petroleum industry that would shed tears for the fall in the oil price. While South Africans have not seen any tangible price reduction at the pumps or in commodities transported by road due to the falling value of the Rand, the serious decline in sectors of the mining industry has had negative knock-on effects for industry.

The mining sector is the second largest consumer of petrochemical products after retail and reduced demand from this critical sector has put additional pressure on petrochemical companies and those involved with its transportation.

It is apparent that when traditional industries falter the world catches a cold.

In addition to getting all non-members and members to agree to price collusion through supply constraints – for that is what the Organisation of the Petroleum Exporting Countries (OPEC) as a cartel is set up for – the petroleum and downstream petrochemicals industries are facing a number of global challenges.

Improved vehicle fuel consumption reduces demand and now diesel is regarded as the new bogyman. Several authorities around the world are planning to ban these vehicles from city precincts due to toxic emissions.

Renault recently announced that stricter emission legislation is behind its decision to discontinue the production of small-scale diesel engines. And then there is the swing to electric or hybrid vehicles.

The demand for plastic products however keeps rising. This is mainly due to consumer demand as more populations become more affluent, and more items are made from this material.

Petrochemical feedstock naphtha and other oils refined from crude oil are the basic building blocks for making plastics. However, the primary feedstocks for the USA petrochemical crackers are hydrocarbon gas liquids (HGL), of which 82% were by-products of natural gas processing; the remaining 18% of the HGL were produced from crude oil by refineries in the USA.

Statistics show that south-east Asia and China account for about 44% of global plastics consumption (world usage stands at an estimated 255m tonnes per annum), so one can see how the region is potentially an environmental problem area.

In a recycling initiative, PlasticsEurope is supporting the publication of a children’s book in Thailand. The storyline is that fish can’t tell the difference between food and plastics, and it is hoped it will have a meaningful impact on youngsters who generally respond positively to environmental conservation, rather than us adults who struggle to cope with the reality.

Here, the latest figures show some good news: our plastics consumption has seen a year-on-year increase in recycled (diverted) tonnages (9%), whilst virgin tonnage consumption has remained static at 1,4m tonnes.

The abundance of natural gas on our doorstep, transportation and pipeline development has the potential of making this the fuel of the future with gas fired power stations a distinct possibility due to cheap, plentiful supply and the added bonus of being a cleaner burning fuel than coal.

With only tiny pockets of gas reticulation serving residential areas in our major cities, surely the time has come to deliver this fuel to homes for heating and cooking? Combine that with solar geysers and we might not have to build quite so many new power stations after all.