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Comparing petrochemical plant aging

By John Pearson, President Access Intelligence, Chemical Business Media div. |

The massive buildup of new petrochemical capacity in the Middle East and Asia has been well documented, and its effect on future supply-demand much discussed. But a look at the average ages of plants in different regions in the years that follow this capacity buildup, prompts new conclusions on just how profound the effects of this new capacity will be.

Ed Gartner, Director of SRI Consulting’s World Petrochemicals research program, has examined the aging of ethylene plants through 2015. Gartner’s methodology is to compare the current- and future-average ages of plants in different regions, using 1974 as the base, or “zero” year. The regions themselves are defined by the OECD. They comprise China-India; ME-AF, which stands for Middle East and Africa, but does not include Turkey; Europe, which includes Western Europe plus Turkey, Poland, the Czech Republic, Hungary and the Slovak Republic; and Pacific, which includes Japan, Korea, Australia and New Zealand

By 2015, analysis shows that the average life of ethylene plants in China-India and ME-AF will be around 10 years, while the average of plants in North America and Europe will be around 30 years. There are several conclusions to be drawn and extrapolations to be made from Gartner’s study:

• First and foremost, plants in the Middle East and China-India will have an efficiency advantage compared with plants in the rest of the world, just because of their age, scale and relatively modern technology

• Meanwhile, plants in North America, Europe and the Pacific will be candidates for closure or replacement, unless their efficiency and competitiveness can be improved and their lifespan expanded

• Shuttering capacity in North America and Europe is becoming increasingly expensive, mainly because of the requirement to remediate the sites on closure. This may lead to the lifetime of older plants being extended beyond normal expectations and/or their product slates being reformulated

• Substantial investment would be needed to rebuild older capacity, and apart from national governments and oil majors, it is not apparent who would have the wherewithal to rebuild North American, European and Pacific capacity

All of these observations point to a more rapid shift of the petrochemicals industry to the axis between the Middle East and China in the years to come. In the North American, European and Pacific regions, meanwhile, the most likely outcome will be a drive towards added-value products that can serve the domestic markets.

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