Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
Introduction
It is amazing how many products of our everyday life are made from oil and gas... and very
few people from the general public are actually aware of it. It is in fact a fairly recent
industry that has made it possible to produce all these goods: this is the petrochemical
industry.
I will first explain to you why the petrochemical industry should be considered as a major
branch of the chemical industry. Then, I will give you insights into the business fundamentals
that drive this industry. We will finally review the routes from petrochemical feedstocks to
plastics, which are the main products of this industry.
Petrochemicals do not reach the final consumer, i.e. - the man in the street. They are
actually at the heart of a Business-to-Business activity. Once converted into plastics and
resins, they are first sold to customer industries, named converters, who transform and
shape them into consumer goods. As a result, few of us make the connection between
the petrochemical industry and the commonplace objects that surround us, commercialized
by retailers.
Proceeding through the petrochemicals value chain, the value of the products progressively
increases.
Oil & gas are quoted on markets at around 100 to 800 Euros per ton of oil equivalent.
Base chemicals are typically traded at prices from 500 to 1,500 Euros per metric ton.
Commodity plastics & resins are generally commercialized at around 1,000 to 2,000 Euros
per ton. Final consumer goods can be even more expensive.
The level of capital investment required to build a new production facility is very different
for each of these industries: very high for oil & gas exploitation and petrochemical
production, much lower for the manufacturing of consumer goods.
This is why there are only a few large companies producing oil and gas. A few more
manufacture base chemicals. Substantially more companies are involved in the production
of raw plastics and resins, whereas millions of smaller companies make the consumer end
products.
Trading is a core activity at each step of the Oil & Gas-to-Plastics value chain.
Each step provides opportunities to buy, sell, exchange or swap products to optimize chain
costs and asset utilization.
Each region of the world has its own specificities in terms of economic outlook and ability to
welcome investments in petrochemicals :
Europe, North America and Japan are homes to the historical petrochemical
companies. North America is undergoing a rebirth of its petrochemical industry
The petrochemical industry is, first and foremost, a global industry, particularly with regard
to the very active trading related to it.
Among the historical companies, BASF was still the leading petrochemical company in 2014.
New players belonging to the fast-growing emerging economies in Asia, such as Sinopec and
Reliance Industries, have more recently joined the group of leading petrochemical
companies. Within the new players, new petrochemical companies have also emerged from
countries benefiting from advantaged feedstocks, such as SABIC. The growing capacity of the
new players is also partly due to the acquisition of activities from historical companies.
Another characteristic of the petrochemical industry is that its products are manufactured
mostly to common specifications, especially for base chemicals. This guarantees to all the
purchasers of petrochemicals the same characteristics and properties from one country to
another, in line with the global nature of this industry.
The manufacturing technologies are available from existing petrochemical producers and
engineering companies. They are being continuously improved and can be acquired by
purchasing licenses.
The design and construction of petrochemical manufacturing plants require, however,
massive capital investments. As feedstock and energy costs are high and product prices
generally set by the market, the only way to make a good profit margin is to build large-scale
production facilities and play on economies of scale.
W4V22 - Petrochemical Industry p. 4
IFPEN - IFP School 2015 / TOTAL SA 2015 / IFP Training 2015
The final purpose of all these petrochemical intermediates is mostly to manufacture large
commodity plastics and resins, as shown by their respective annual production tonnages.
Ethylene can afterwards be converted into lightweight plastics called polyethylenes, or it
can be chemically transformed, after further steps, into polyvinyl chloride (PVC), a plastic
material encountered in the building industry.
In the same way, propylene can be used to make polypropylene, a versatile plastic.
W4V22 - Petrochemical Industry p. 5
IFPEN - IFP School 2015 / TOTAL SA 2015 / IFP Training 2015