Electrification and carbon capture and storage (CCS) are set to play significant roles in reducing emissions from the production of high-value chemicals (HVC), which are key feedstocks to make plastics and many manufactured goods. HVCs are said to be responsible for up to 2% of global emissions, equivalent to the aviation sector and double the aluminium industry’s contribution.

There is a global push for the petrochemicals industry to cut its emissions by 2050, driven by governments, the International Energy Agency (IEA) and corporate net zero commitments. Despite facing a more complex decarbonisation path than nearly any other sector, petrochemical players’ net zero targets cover more of the global manufacturing capacity than other heavy emitters like the steel and cement industries.

The BNEF report Decarbonising petrochemicals: A net zero pathway outlines a pathway to low-emissions chemicals and describes how a combination of falling CCS and electrification costs could reduce emissions to net zero, even while total petrochemical production grows significantly.

However, there is a tight deadline to meet. ‘Large-scale capex spending must start before the end of the decade if the petrochemical industry has any hope of reaching net zero,’ says Ilhan Savut, Sustainable Materials Analyst at BNEF and lead author of the report.

BNEF estimates that new clean capacity and retrofits for lower emissions will cost the petrochemicals industry an additional $759bn (£616bn) compared to business-as-usual capacity growth. This is roughly 1% of the $172tn (£142tn) estimated by BNEF to be needed to decarbonise the global energy sector by 2050. The analysts maintain that decarbonising chemicals will be capex intensive. Nevertheless, they recognise it is crucial for all new capacity and retrofits beyond 2030 to be net zero, to avoid the risk of stranding assets over their long lifetimes.

‘Deploying these technologies will be expensive in the short term, but it could set the sector on a lower-cost decarbonisation path. Given their long asset lifetimes, chemicals players must move quickly and fund net zero projects as soon as possible, or risk getting locked out of key technologies. Investments today will be key to managing longer-term costs and pay dividends post-2035,’ remarks Savut.

Cheapest option 
By 2050, CCS could be the cheapest decarbonisation option for net zero petrochemicals with the potential to abate the emissions of 40% of HVC production (see Fig 1). Another 35% would rely on new electrified cracker designs, which could provide the only net zero production route that is cost-competitive with conventional steam crackers. Bioplastics, which are the only commercially available net zero route today, could capture only 2.5% of the market by 2050, due to high costs and a lack of sustainable biomass.

Fig 1: 2050 decarbonisation pathway for high-value chemicals
Note: CCS – carbon capture and storage; ATR – autothermal reformer; PDH – propane dehydrogenation; MTO – methanol-to-olefins; MTA – methanol-to-aromatics
Sources: BloombergNEF, Dow, Shell, BASF, Borealis, BP, LyondellBasell, SABIC, Repsol and others

Adoption of carbon capture, use and storage (CCUS) is seen as a ‘unique opportunity’ for integrated oil majors, which already have expertise in the technology (ie using carbon capture for enhanced oil recovery) and could accelerate cost declines.

The report notes that oil companies have been exploring a greater footprint in the petrochemicals space as a hedge against declining fuel demand. If these companies shift the focus of their CCUS investments into downstream assets, they could lead the transition by expanding net zero petrochemicals production and driving down costs for the entire sector.

Oil companies are also interested in a greater footprint in the petrochemicals space as a hedge against declining fuel demand. However, the petrochemicals supply chain cannot decarbonise without the help of refiners.

Currently, most of the world’s supply of aromatics, a key chemical ingredient in products like PET (polyethylene terephthalate) bottles, is sourced from refineries as a by-product of fuel production. In a net zero scenario, refinery retirements start in 2030 as demand for transport fuels peaks and then begins to decline due to passenger car electrification. This leaves a gap in aromatics supply that can currently only be addressed using green methanol feedstock – an expensive route that would triple the price of many chemicals. This process would account for 20% of chemicals production, up from zero today, unless refiners make a dramatic pivot to focus on chemicals production while simultaneously decarbonising their operations.

BNEF’s research shows that low carbon routes will remain more expensive in 2050 than today’s production, despite some steep cost declines. This could lead to persistent green premiums and create strong incentives to replace or reduce plastic and chemicals use in markets with net zero mandates. Chemicals are crucial inputs to many industrial supply chains, so decarbonising them could increase costs across several sectors. Unless cost declines are significantly accelerated, taxpayers will likely pay for long-term abatement either through higher prices or subsidies.

Scope for improvement 
If green plastics are burned at the end of their life, they are no longer net zero.

According to Julia Attwood, Head of Sustainable Materials at BNEF: ‘While many net zero targets do not cover Scope 3 emissions, customers and investors will link incinerated plastic to oil and chemicals companies, as they did with plastic waste. The whole supply chain is a plastic producer’s problem. A low carbon petrochemical sector will require circular economy action. Producers are already working with refiners and waste managers to source circular and low carbon feedstocks.’

Carbon pricing impact 
While most net zero capacity today is being driven by customer demand for sustainable plastics, policymakers can also kick-start decarbonisation in petrochemicals. BNEF notes that carbon pricing is often touted as a decarbonisation lever, but very high prices would be needed to incentivise change. At $250/tCO₂, 80% of all net zero HVCs production would be competitive with unabated production.

Current prices in Europe sit at about $90/tCO₂, and the prices seen by industrial emitters is actually much lower thanks to generous free allowances. To incentivise quicker action, governments are recommended to provide longer-term subsidies to early adopters to justify higher production costs and invest in enabling infrastructure such as CO₂ transport and storage networks and grids providing 24/7 clean power.

Petrochemical decarbonisation initiatives 
The chemicals sector has a raft of initiatives underway to decarbonise assets, including the following European and US initiatives.

Electrification of crackers 
Using renewable energy to heat steam cracker furnaces could become one of the key routes to decarbonise the chemicals sector. European crackers currently emit 30mn t/y of CO₂ (ie 20–25% of European chemical industries’ overall greenhouse gas emissions). In combination with other electrification measures, electric cracking is expected to eliminate the crackers’ greenhouse gas emissions to a large extent.

Today, European crackers predominantly operate on fossil-based naphtha feedstock with some light feedstock such as LPG and ethane originated from oil refining and natural gas liquids. Electric crackers will also be able to convert bio-naphtha and pyrolysis oil from waste plastics for circularity.

Dow and Shell have a joint development programme to electrify ethylene steam crackers, which currently rely on fossil fuel combustion to heat their furnaces, producing considerable CO₂ emissions. The companies secured €3.5mn (£3mn) funding from the Dutch government and joined up with Dutch applied research organisation TNO and the Institute for Sustainable Process Technology. An experimental e-cracking furnace unit has just begun operation at the Energy Transition Campus Amsterdam, to test an electrification model developed for retrofit to gas-fired stream cracker furnaces. Design and construction of a multi-megawatt pilot plant is scheduled for potential start-up in 2025, subject to investment support.

Shell and Dow’s experimental e-cracking furnace at the Energy Transition Campus Amsterdam
Photo: Shell, Dow

Seven petrochemical companies, including BASF, Borealis, BP, LyondellBasell, SABIC, TotalEnergies and most recently Repsol, created a ‘Crackers of the Future consortium’ (accounting for one-third of the European Union’s steam cracker capacity) to jointly investigate how naphtha or gas steam crackers could be operated using renewable electricity instead of fossil fuels. The consortium is said to have identified some ‘very promising options’. A demonstration project is scheduled for 2023 for commercial operation by 2026.

Power-from-waste  
Solvay and Veolia have an ambitious decarbonisation project under development at Dombasle-sur-Meurthe in France to replace three coal-fired boilers with two furnaces running on refuse-derived fuel (RDF), halving the plant’s carbon emissions by 240,000 t/y of CO₂. The plant will have a thermal power capacity of 181 MW and 17.5 MW electrical power under a €225mn (£194mn) investment which is scheduled to come onstream in 2024. ‘Solvay One Planet is aiming for carbon neutrality by 2050 under its sustainable development roadmap,’ says Ilham Kadri, CEO of the Solvay Group.

BASF is partnering with Quantafuel and plastic waste supplier Remondis to jointly invest in a pyrolysis plant for plastic waste as part of its ChemCycling project. France currently recycles about 25% of its plastic. Chemical recycling can complement mechanical recycling, bringing back more plastic waste into the circular economy that would otherwise be incinerated.  ‘BASF has set itself the goal to process 250,000 t/y of recycled feedstock from 2025 onwards’, says Lars Kissau, Senior Vice President Global Strategic Business Development at BASF’s Petrochemicals division.

TotalEnergies signed an agreement at the start of the year with Plastic Energy to develop an advanced plastic recycling plant in Sevilla, Spain, in addition to its existing plant. This will transform plastic waste into a recycled feedstock called Tacoil, which can be used for food-grade packaging. The plant will convert 33,000 t/y of plastic waste which was destined for landfill or incineration and is expected to be operational in early 2025.

First North American net zero ethylene plant 
Dow plans to build what it claims is the petrochemical industry’s first net zero carbon emissions ethylene and derivatives complex at the company’s Fort Saskatchewan, Alberta site in Canada in 2030. The project will include a 1.8mn t/y net zero carbon emissions steam cracker, which is scheduled for start-up by 2027, according to the US-based petrochemical giant. Construction of the steam cracker will be followed by retrofit of existing assets to comply with net zero Scope 1 (direct emissions) and Scope 2 (indirect) CO₂ emissions.

These projects are a taste of a vast range of petrochemical decarbonisation projects in the pipeline. 

Part 2 of this article will be published on 27 July 2022.