The petrochemical industry needs to diversify its feedstocks, moving away from over-reliance on naphtha which is subject to price volatility and fluctuating shifts in supply, Samsung Total Petrochemicals Senior Vice President Jean-Baptiste Roques said at the 15th annual Condensate and Naphtha Forum held in Doha over Monday and Tuesday.
"Let's face it -- naphtha is here to stay and will remain the key petrochemical feedstock, but it is volatile, and volatility is bad for business, let's make that clear," Roques said.
"For a guy in the plastics business, he doesn't like that and I will bet any amount of money on any petrochemical company that loves volatility -- we need to diversify for cheaper, more stable, and more efficient feedstocks," he added.
As petrochemical downstream products' price movements lag that of crude, end-user margins can suffer during volatile periods, he said. This was brought into sharp focus two weeks ago when naphtha outright prices soared to 30-month peaks tracking Western crude benchmarks following unrest in the Middle East and North Africa, which drove cracking margins into the negative terrain overnight.
Supply stability is another factor that warrants concern, Roques said. Sudden shifts could see Northwest Europe volumes channeled to the US Gulf Coast, while Middle East exports to Asia could be capped as producers divert heavy naphtha to feed new aromatic plants instead, he added.
But petrochemical end-users have a variety of alternatives such as LPG, condensates, and even crude oil, as feedstock, he pointed out. In the long run, Roques said, advances in technology could see growing utilization of methanol, coal, ethanol, and carbon dioxide as petrochemical feedstocks, with the 'green' factor in ethanol and carbon dioxide usage already fueling interest among corporations to invest in further research and development activities.
"The sugar platform will result in plenty of ethanol coming on stream and that can produce PVC of which China is the biggest consumer with a third of market share," Roques said.
"Sugar can very easily 'green' businesses and its gained support from major retail sector companies, while carbon dioxide is the holy grail of chemistry because it involves capturing greenhouse gases for the production of polymers -- the challenge here is technology development, as well as food concerns for ethanol because it is derived from sugar," he said.
Still, Roques conceded that the main petrochemical feedstocks are still oil- and gas-based, with 80% of petrochemical production drawn from that sector.
