"This plastic crisis is rooted in the overproduction of single-use plastics, building for us and future generations a very toxic legacy," said one Indonesian youth activist.
Ahead of the fifth and final round of negotiations for a global plastics treaty in Busan, South Korea, people took to the streets to demand meaningful action from world leaders.
(Photo: Sungwoo Lee/Greenpeace)
Jessica Corbett
Nov 24, 2024
COMMON DREAMS
With the fifth and final round of global plastics treaty negotiations set to begin Monday in Busan, South Korea, an estimated 1,500 people took to the city's streets and nearly 3 million more signed a petition calling for a legally binding pact "to drastically reduce production and use, and protect human health and the environment."
The Saturday march at the Busan Exhibition and Convention Center was led by the global Break Free From Plastic (BFFP) movement and local allies from the Uproot Plastics Coalition. They want the treaty to include targets to slash production.
"Mandatory targets to reduce plastic production are essential to combat the triple planetary crisis of climate change, biodiversity loss, and toxic pollution," BFFP's Semee Rhee said in a statement. "Failure to check the untrammeled production of primary plastic polymers would mean allowing the plastic pollution crisis to persist and perpetuate social and environmental injustices for generations to come."
Indonesia youth activist Aeshnina Azzahra Aqilani stressed that "this plastic crisis is rooted in the overproduction of single-use plastics, building for us and future generations a very toxic legacy. Waste created today will poison all children and the planet through toxic plastic emission and microplastic exposure along the plastic life cycle."
"Safeguard the health and survival of future generations by advocating for a legally binding global plastic treaty—a treaty that encompasses ambitious goals for a reduction in plastic production, with accountability placed on corporations for reuse and refill solutions in its place," the campaigner urged. "The world is watching. The future is waiting. Make the right decision."
The first session of the Intergovernmental Negotiating Committee (INC) was held two years ago in Uruguay. Since then, there have been meetings in France, Kenya, and Canada. The latest lobbyist-dominated round of talks concluded in April with no clear path to curbing production, which civil society and frontline groups have argued is a "nonnegotiable" component of the treaty.
The Busan meeting is scheduled to run from Monday through next weekend, on the heels of the United Nations climate summit that just wrapped up after running into overtime in Baku, Azerbaijan. Plastic production is not only a waste problem but also a contributor to the climate emergency, because 99% of it is made from chemicals sourced from fossil fuels.
"As the host country of INC-5 and the world's fourth-largest producer of plastic raw materials, the South Korean government bears a significant responsibility in addressing plastic pollution," said Sammy Yu of Green Korea United. "Despite its passive stance during INC-4, the Korean government must take a decisive position on 'reducing production' at the fifth round of negotiations and advocate for it strongly."
"Moreover, negotiations are not confined to the conference room," Yu asserted. "To effectively push for a production reduction stance in these discussions, the government must first restore its domestic resource circulation policies, which have regressed over the past two years, and align them with its negotiation position."
Sunryul Kim of Greenpeace Seoul office said that "the people are speaking with one voice, demanding that the negotiators ensure that the plastics treaty will ensure cuts in production and end single-use plastic."
"We are at the most critical part of creating this agreement and what will come out of this negotiation will affect our future for generations to come," Kim continued. "As the host country and a member of High Ambition Coalition (HAC), the South Korean government must listen to its citizens and lead the way for strong production reduction targets at the negotiating table."
Greenpeace, BFFP, and the World Wide Fund for Nature (WWF) collected 2,899,202 petition signatures, which were delivered during a Sunday event in Busan to U.S. Sen. Jeff Merkley (D-Ore.), sponsor of the Break Free From Plastic Pollution Act, and Rwanda Environment Management Authority Director General Juliet Kabera, whose country co-chairs the HAC with Norway.
Politicians receive nearly 3 million petition signatures calling for an end to the age of plastic before treaty talks in Busan, South Korea on November 24, 2024. (Photo: Sungwoo Lee/Greenpeace)
"These signatures reinforce what is already commonly known—that a legally binding global treaty that regulates plastics across the entire life cycle and eliminates harmful plastic products and chemicals is the only way our leaders can deliver on their promise to end plastic pollution," said Eirik Lindebjerg, WWF global plastics policy lead and head of delegation to INC-5.
"We simply cannot achieve this goal through fragmented and voluntary actions which have dominated our collective response for so many years," Lindebjerg added. "At INC-5, governments can and must create the treaty people are demanding, one which decisively and definitely protects people and nature now and for generations to come."
Also on Sunday, hundreds of activists with Friends of the Earth International (FOEI) and its South Korean arm made a human sign spelling out "End Plastic" on a beach near where over 175 governments are set to meet for the final round of negotiations.
"We are united in our call for a strong treaty that tackles the plastic pollution crisis head-on, demanding action that cuts plastic production at its very source," said FOEI chair Hemantha Withanage. "The urgency of the plastic issue can no longer be understated. Every day, the equivalent of 2,000 garbage trucks full of plastic are dumped into the world's oceans, rivers, and lakes, choking ecosystems and communities."
Activists with Friends of the Earth International made a human sign spelling out "End Plastic" on a beach near the final round of treaty negotiations in Busan, South Korea on November 24, 2024. (Photo: FOEI)
Speaking with The Guardian ahead of the talks, Norwegian Minister of International Development Anne Beathe Tvinnereim warned that the world will be "unable to cope" with plastic waste a decade from now unless there is a deal reached to cut production.
"We are not going to land a perfect treaty. But we need to get further. And I think we will. I choose to be hopeful," Tvinnereim said. "With High Ambition Coalition countries, we will continue to demonstrate that there is a big group of countries that sticks to its ambitions. The world desperately needs some leadership now, and some good news."
Can a global treaty clean up plastic waste?
The fossil fuel industry is also rapidly expanding virgin plastics as their next major growth market to replace business lost to the green energy transition.
Recycling and waste management cannot keep pace with the explosion in production.
"Waste management capacity is overwhelmed; we have an oversupply and abundance of plastic," said Christina Dixon, Ocean Campaign leader at the New York-based Environmental Investigation Agency (EIA), which is promoting the treaty.
Will a plastics treaty be ambitious enough?
But some say even a "40x40" goal is insufficient, especially amid efforts to limit the global temperature rise to 1.5 degrees Celsius (2.7 Fahrenheit) in comparison with preindustrial times, a target agreed as part of the Paris climate accord to avoid ever more extreme impacts from global heating.
By 2050, emissions from expanding production could consume at least 21-31% of the remaining carbon budget to stay within 1.5C. Modeling suggests a 75% cut in plastic production by 2040 is necessary to stay under the threshold, according to Greenpeace.
Meanwhile, a report released by environmental scientists at Eunomia Research and Consulting and commissioned by the EIA says the 40x40 goal would work to significantly cut emissions only if coupled with a rise in global recycling rates to 63%, and that it wouldn't be enough for 1.5C.
Stuart Braun Berlin-based journalist with a focus on climate and culture.
DW
11/25/2024
The final round of negotiations taking place in South Korea for a worldwide plastics treaty will look to rapidly cut surging plastic pollution. But oil and gas interests could scupper a deal.
The final round of negotiations taking place in South Korea for a worldwide plastics treaty will look to rapidly cut surging plastic pollution. But oil and gas interests could scupper a deal.
Global leaders are meeting to strike a deal to control plastic wasteImage: Timur Matahari/AFP/Getty Images
Following two years of talks, countries are scrambling to finalize a binding global treaty that would limit the surge of plastics polluting the planet.
Representatives from some 175 countries will try to overcome stark differences on how to tackle the waste deluge in the final round of negotiations this week in Busan, South Korea.
The UN Environment Program (UNEP) has said a treaty would be the most significant multilateral environment deal since the 2015 Paris climate accord, given the huge scale of the plastic crisis.
"It is an insurance policy for this generation and future ones, so they may live with plastic and not be doomed by it," said Inger Andersen, UNEP executive director, in 2022, when nations first agreed to forge a treaty to end plastic pollution.
In 2019, the world generated around 350 million tons of plastic waste. Just 9% was recycled, with the rest being incinerated, going to landfill or ending up in the environment.
Following two years of talks, countries are scrambling to finalize a binding global treaty that would limit the surge of plastics polluting the planet.
Representatives from some 175 countries will try to overcome stark differences on how to tackle the waste deluge in the final round of negotiations this week in Busan, South Korea.
The UN Environment Program (UNEP) has said a treaty would be the most significant multilateral environment deal since the 2015 Paris climate accord, given the huge scale of the plastic crisis.
"It is an insurance policy for this generation and future ones, so they may live with plastic and not be doomed by it," said Inger Andersen, UNEP executive director, in 2022, when nations first agreed to forge a treaty to end plastic pollution.
In 2019, the world generated around 350 million tons of plastic waste. Just 9% was recycled, with the rest being incinerated, going to landfill or ending up in the environment.
Some nations have already banned single-use drinking straws and utensils
Image: Imago
Once discarded, durable plastic products, such as single-use drinking straws, can remain in the environment for hundreds of years and contaminate ecosystems and the food chain. With some 99% of plastics sourced from fossil fuels, plastic production is also exacerbating the climate crisis, say scientists.
Reducing plastic production the key challenge
Environmental campaigners are calling on countries to consider reducing plastic polymer production globally by 40% by 2040 — a proposal put forward by Rwanda and Peru during the last round of talks in Ottawa, Canada, in April.
This could happen through various mitigation measures used across the plastic life cycle. These include a reduction in plastic production; the elimination of toxic and avoidable single-use plastics; and the redesign of packaging to make it more reusable, biodegradable and fully recyclable.
Multinational companies that use plastic packaging for their products are promoting more plastic recycling as a solution to the crisis, including through more efficient chemical recycling technologies as opposed to mechanical methods.
But groups such as environment campaigners Greenpeace are calling for the treaty to focus on rapidly reducing plastic production. Production is set to triple by 2050, partly because making virgin plastic is cheaper than recycling — especially with an oversupply of fracked gas in countries like the US.
Once discarded, durable plastic products, such as single-use drinking straws, can remain in the environment for hundreds of years and contaminate ecosystems and the food chain. With some 99% of plastics sourced from fossil fuels, plastic production is also exacerbating the climate crisis, say scientists.
Reducing plastic production the key challenge
Environmental campaigners are calling on countries to consider reducing plastic polymer production globally by 40% by 2040 — a proposal put forward by Rwanda and Peru during the last round of talks in Ottawa, Canada, in April.
This could happen through various mitigation measures used across the plastic life cycle. These include a reduction in plastic production; the elimination of toxic and avoidable single-use plastics; and the redesign of packaging to make it more reusable, biodegradable and fully recyclable.
Multinational companies that use plastic packaging for their products are promoting more plastic recycling as a solution to the crisis, including through more efficient chemical recycling technologies as opposed to mechanical methods.
But groups such as environment campaigners Greenpeace are calling for the treaty to focus on rapidly reducing plastic production. Production is set to triple by 2050, partly because making virgin plastic is cheaper than recycling — especially with an oversupply of fracked gas in countries like the US.
Why recycled ocean plastic is (often) a lie 09:12
The fossil fuel industry is also rapidly expanding virgin plastics as their next major growth market to replace business lost to the green energy transition.
Recycling and waste management cannot keep pace with the explosion in production.
"Waste management capacity is overwhelmed; we have an oversupply and abundance of plastic," said Christina Dixon, Ocean Campaign leader at the New York-based Environmental Investigation Agency (EIA), which is promoting the treaty.
Will a plastics treaty be ambitious enough?
But some say even a "40x40" goal is insufficient, especially amid efforts to limit the global temperature rise to 1.5 degrees Celsius (2.7 Fahrenheit) in comparison with preindustrial times, a target agreed as part of the Paris climate accord to avoid ever more extreme impacts from global heating.
By 2050, emissions from expanding production could consume at least 21-31% of the remaining carbon budget to stay within 1.5C. Modeling suggests a 75% cut in plastic production by 2040 is necessary to stay under the threshold, according to Greenpeace.
Meanwhile, a report released by environmental scientists at Eunomia Research and Consulting and commissioned by the EIA says the 40x40 goal would work to significantly cut emissions only if coupled with a rise in global recycling rates to 63%, and that it wouldn't be enough for 1.5C.
Fossil-fuel companies are focusing on plastics to make up for business lost to the green energy transitionI
mage: Evgeny Romanov/Pond5 Images/IMAGO
The report also stated that the plastic sector would need to decarbonize, using renewable energy, for example, while production would have to peak in 2025 at the same time.
But as the final negotiation deadline approaches, countries are still at odds over how far the rules should go.
Oil-producing nations oppose plastic production limits
Many nations that will decide the scope and ambition of the plastics treaty have interests that clash with such rules.
Led by Rwanda and Norway, more than 60 countries have joined a High Ambition Coalition that wants to end all plastic production by 2040.
But according to EIA's Christina Dixon, several countries have been "very difficult" during the four rounds of negotiations so far and "don't want to see any agreement at all."
Oil-producing nations like Iran, Russia and Saudi Arabia are focused on increased recycling and not on plastic production cuts, wanting instead to preserve a vital fossil fuel market into the future.
Daniela Duran Gonzalez, a senior legal campaigner with the Washington DC-based Center for International Environmental Law, said during the last round of treaty talks that negotiations were not over a "waste treaty" but "the future of fossil fuels."
The US, a plastics and fossil-fuel giant, changed tack following the last treaty negotiations and now supports a plastic reduction target. The fossil-fuel-rich nation had favored better plastics recycling and reuse, and voluntary compliance as opposed to binding production limits.
That stance could change again with the incoming Donald Trump administration. The president-elect has long promised to roll back climate policies and expand fossil fuel production.
"Given what happened under the previous Trump administration, I think it's quite unlikely that Trump would ratify the treaty," said Dixon.
But nations in the Global South, along with EU member states, are keeping the dream of a plastics treaty alive.
Griffins Ochieng, programs coordinator at the Kenya-based Center for Environment Justice and Development, told a briefing held before the final treaty negotiations that African nations are demanding "an end to plastics pollution across their whole life cycle."
Reduction in plastic production will be key, along with the "elimination" of harmful chemicals, he said.
While it is possible a treaty text will not be agreed in Busan, Dixon insists that negotiators should reflect a "huge global appetite for a binding treaty."
Edited by: Jennifer Collins
The report also stated that the plastic sector would need to decarbonize, using renewable energy, for example, while production would have to peak in 2025 at the same time.
But as the final negotiation deadline approaches, countries are still at odds over how far the rules should go.
Oil-producing nations oppose plastic production limits
Many nations that will decide the scope and ambition of the plastics treaty have interests that clash with such rules.
Led by Rwanda and Norway, more than 60 countries have joined a High Ambition Coalition that wants to end all plastic production by 2040.
But according to EIA's Christina Dixon, several countries have been "very difficult" during the four rounds of negotiations so far and "don't want to see any agreement at all."
Oil-producing nations like Iran, Russia and Saudi Arabia are focused on increased recycling and not on plastic production cuts, wanting instead to preserve a vital fossil fuel market into the future.
Daniela Duran Gonzalez, a senior legal campaigner with the Washington DC-based Center for International Environmental Law, said during the last round of treaty talks that negotiations were not over a "waste treaty" but "the future of fossil fuels."
The US, a plastics and fossil-fuel giant, changed tack following the last treaty negotiations and now supports a plastic reduction target. The fossil-fuel-rich nation had favored better plastics recycling and reuse, and voluntary compliance as opposed to binding production limits.
That stance could change again with the incoming Donald Trump administration. The president-elect has long promised to roll back climate policies and expand fossil fuel production.
"Given what happened under the previous Trump administration, I think it's quite unlikely that Trump would ratify the treaty," said Dixon.
But nations in the Global South, along with EU member states, are keeping the dream of a plastics treaty alive.
Griffins Ochieng, programs coordinator at the Kenya-based Center for Environment Justice and Development, told a briefing held before the final treaty negotiations that African nations are demanding "an end to plastics pollution across their whole life cycle."
Reduction in plastic production will be key, along with the "elimination" of harmful chemicals, he said.
While it is possible a treaty text will not be agreed in Busan, Dixon insists that negotiators should reflect a "huge global appetite for a binding treaty."
Edited by: Jennifer Collins
Stuart Braun Berlin-based journalist with a focus on climate and culture.
Big Oil Still Betting On Plastics Despite Sector Going Bust
Big oil is investing heavily in petrochemicals as a long-term hedge against an uncertain future for fossil fuels.
The International Energy Agency has reported that 90% of China’s increased oil demand from 2021 to 2024 comes from chemical feedstocks like LPG, ethane, and naphtha.
Both U.S. oil majors and Middle East oil companies are increasing their bets on petrochemicals.
Back in September, we reported that Abu Dhabi National Oil Co (ADNOC) signaled a willingness to raise its informal offer to 60 euros per share for a valuation of $12.6 billion for German plastics and chemicals maker Covestro. The latest offer would represent a premium of nearly 30% to Covestro's share price. ADNOC last raised its informal offer to 57 euros per share in July, although no final decision has yet been made.
ADNOC is going on a real M&A spree: Abu Dhabi’s national oil company is also looking to acquire Austria's integrated energy company OMV (OTCPK:OMVJF) in a potential merger of the two companies that could form an entity worth $30 billion.
At first glance, one deal makes plenty of sense while the other looks like a bummer. Last week, OMV announced a major natural gas discovery in the Norwegian Sea.
In a statement released on Friday, OMV said it had found preliminary estimated total recoverable natural gas volumes of up to 140 million barrels of oil equivalent (boe) after completing a drilling operation in the Norwegian Sea targeting its Haydn/Monn exploration prospects. The deepwater prospect is located 300 km west of the Norwegian mainland at a water depth of 1,064m.
Morgan Stanely recently predicted that natural gas markets are poised to enter a new cycle of demand growth thanks to surging LNG exports and rising electricity demand. Natural gas is currently enjoying a strong rally with prices jumping nearly 30% over the past two weeks on expectations of higher demand as production continues to slow down. Meanwhile, colder weather at the end of November is expected to boost heating demand, with European natural gas futures jumped above €48.2 per megawatt-hour on Monday, approaching the one-year high of €48.7 as the outlook of higher demand magnified the impact of uncertain supply.
Related: Russia-Ukraine Escalation Reignites Oil’s War Premium
In sharp contrast, petrochemicals are going through a huge bust cycle. Earlier in August, Covestro reported a 21%Y/Y fall in second quarter revenues to 3.7 billion euros. Covestro is hardly alone, with U.S. oil and gas giants facing a similar fate. Sluggish consumer demand as well as a deluge of new factories coming online over the past few years means petrochemical margins face a protracted downturn. The situation is so dire that Cologne-based Lanxness AG has called it a “Lehman 2” moment for the chemicals industry.
“It’s been a pretty dramatic downturn. With chemicals oversupplied right now, large oil companies will find other areas to invest in,” Joseph Chang, a New York-based analyst at ICIS, has told Bloomberg.
But Big Oil has chosen to play the long game here, and these companies are investing heavily in petrochemicals as a long-term hedge against an uncertain future for fossil fuels. Petrochemicals, which go into plastics, polyester and many other cheap and lightweight commodities that underpin modern life, could help oil companies stay afloat long after demand for transport fuels has peaked.
A 2023 review of the major oil and gas and chemicals companies found that over the next three years, Exxon Mobil Corp. (NYSE:XOM) plans to invest over $20 billion in expanding plastic production; CPChem will spend $14.5 billion and Dow Inc. (NYSE:DOW) plans to invest USD 10 billion.
A lot of those petrollars are flowing into the Chinese market. According to Ciarán Healy, oil market analyst at the IEA, ~6.7mn bpd, or 6.5 per cent of all global oil use, currently goes to supply China with petrochemicals. The International Energy Agency has reported that 90% of China’s increased oil demand from 2021 to 2024 comes from chemical feedstocks like LPG, ethane, and naphtha. IEA notes that between 2019 and 2024, additional Chinese production capacity for ethylene and propylene will exceed the combined current capacities of Europe, Japan, and South Korea. Between 2018 and 2023, China’s output of synthetic fibers alone rose by 21 million metric tons--enough to spin more than 100 billion T-shirts a year. A new breed of private refiners such as Hengli Petrochemical and Rongsheng Petrochemical has emerged in China whereby they are spending billions of dollars building plants specializing in chemicals, rather than gasoline and diesel.
Ironically, petrochemicals are crucial for the green energy transition, with EVs typically using more thermoplastics, foams, fibers and rubber pads than ICE vehicles. Indeed, U.S. chemical practice leader at Deloitte David Yankovitz has told the Financial Times that EV makers are substituting plastic resins for metal parts to make lighter cars. Yankovitz says that roughly three-quarters of all emissions-reduction technologies require chemicals, most of which are oil-derived. China has met much of that demand through domestic processing of imported crude. But the US shale oil boom has also formed a mutually reinforcing “symbiosis” with growing Chinese demand for petrochemicals. According to ICIS data, between 2019 and 2023, the U.S. was the only major producer to boost its polymer exports into China,
Exxon is currently building a petrochemical complex in southern China’s Guangdong province, as well as expanding its own chemical production at existing facilities on the U.S. Gulf Coast. According to Exxon, the chemical complex will produce performance polymers used in packaging, automotive, agricultural, and consumer products for hygiene and personal care.
“Demand for performance polymers will continue to increase in China, and we’re well positioned to meet the needs of that growing market,” “We look forward to progressing this exciting project as we work to build a competitive growth platform in Dayawan,” said Karen McKee, president of ExxonMobil Chemical Company, at the unveiling of the project in 2021.
Meanwhile, last year, Saudi Aramco acquired a 10% stake in Shenzhen-listed Rongsheng Petrochemical for $3.6bn, and has entered talks to buy a stake in Hengli Petrochemical, a top Chinese producer of chemicals for plastics. Last year, Aramco-owned S-Oil broke ground on a $7bn petrochemical factory in South Korea.
By Alex Kimani for Oilprice.com
By Alex Kimani - Nov 25, 2024,
Big oil is investing heavily in petrochemicals as a long-term hedge against an uncertain future for fossil fuels.
The International Energy Agency has reported that 90% of China’s increased oil demand from 2021 to 2024 comes from chemical feedstocks like LPG, ethane, and naphtha.
Both U.S. oil majors and Middle East oil companies are increasing their bets on petrochemicals.
Back in September, we reported that Abu Dhabi National Oil Co (ADNOC) signaled a willingness to raise its informal offer to 60 euros per share for a valuation of $12.6 billion for German plastics and chemicals maker Covestro. The latest offer would represent a premium of nearly 30% to Covestro's share price. ADNOC last raised its informal offer to 57 euros per share in July, although no final decision has yet been made.
ADNOC is going on a real M&A spree: Abu Dhabi’s national oil company is also looking to acquire Austria's integrated energy company OMV (OTCPK:OMVJF) in a potential merger of the two companies that could form an entity worth $30 billion.
At first glance, one deal makes plenty of sense while the other looks like a bummer. Last week, OMV announced a major natural gas discovery in the Norwegian Sea.
In a statement released on Friday, OMV said it had found preliminary estimated total recoverable natural gas volumes of up to 140 million barrels of oil equivalent (boe) after completing a drilling operation in the Norwegian Sea targeting its Haydn/Monn exploration prospects. The deepwater prospect is located 300 km west of the Norwegian mainland at a water depth of 1,064m.
Morgan Stanely recently predicted that natural gas markets are poised to enter a new cycle of demand growth thanks to surging LNG exports and rising electricity demand. Natural gas is currently enjoying a strong rally with prices jumping nearly 30% over the past two weeks on expectations of higher demand as production continues to slow down. Meanwhile, colder weather at the end of November is expected to boost heating demand, with European natural gas futures jumped above €48.2 per megawatt-hour on Monday, approaching the one-year high of €48.7 as the outlook of higher demand magnified the impact of uncertain supply.
Related: Russia-Ukraine Escalation Reignites Oil’s War Premium
In sharp contrast, petrochemicals are going through a huge bust cycle. Earlier in August, Covestro reported a 21%Y/Y fall in second quarter revenues to 3.7 billion euros. Covestro is hardly alone, with U.S. oil and gas giants facing a similar fate. Sluggish consumer demand as well as a deluge of new factories coming online over the past few years means petrochemical margins face a protracted downturn. The situation is so dire that Cologne-based Lanxness AG has called it a “Lehman 2” moment for the chemicals industry.
“It’s been a pretty dramatic downturn. With chemicals oversupplied right now, large oil companies will find other areas to invest in,” Joseph Chang, a New York-based analyst at ICIS, has told Bloomberg.
But Big Oil has chosen to play the long game here, and these companies are investing heavily in petrochemicals as a long-term hedge against an uncertain future for fossil fuels. Petrochemicals, which go into plastics, polyester and many other cheap and lightweight commodities that underpin modern life, could help oil companies stay afloat long after demand for transport fuels has peaked.
A 2023 review of the major oil and gas and chemicals companies found that over the next three years, Exxon Mobil Corp. (NYSE:XOM) plans to invest over $20 billion in expanding plastic production; CPChem will spend $14.5 billion and Dow Inc. (NYSE:DOW) plans to invest USD 10 billion.
A lot of those petrollars are flowing into the Chinese market. According to Ciarán Healy, oil market analyst at the IEA, ~6.7mn bpd, or 6.5 per cent of all global oil use, currently goes to supply China with petrochemicals. The International Energy Agency has reported that 90% of China’s increased oil demand from 2021 to 2024 comes from chemical feedstocks like LPG, ethane, and naphtha. IEA notes that between 2019 and 2024, additional Chinese production capacity for ethylene and propylene will exceed the combined current capacities of Europe, Japan, and South Korea. Between 2018 and 2023, China’s output of synthetic fibers alone rose by 21 million metric tons--enough to spin more than 100 billion T-shirts a year. A new breed of private refiners such as Hengli Petrochemical and Rongsheng Petrochemical has emerged in China whereby they are spending billions of dollars building plants specializing in chemicals, rather than gasoline and diesel.
Ironically, petrochemicals are crucial for the green energy transition, with EVs typically using more thermoplastics, foams, fibers and rubber pads than ICE vehicles. Indeed, U.S. chemical practice leader at Deloitte David Yankovitz has told the Financial Times that EV makers are substituting plastic resins for metal parts to make lighter cars. Yankovitz says that roughly three-quarters of all emissions-reduction technologies require chemicals, most of which are oil-derived. China has met much of that demand through domestic processing of imported crude. But the US shale oil boom has also formed a mutually reinforcing “symbiosis” with growing Chinese demand for petrochemicals. According to ICIS data, between 2019 and 2023, the U.S. was the only major producer to boost its polymer exports into China,
Exxon is currently building a petrochemical complex in southern China’s Guangdong province, as well as expanding its own chemical production at existing facilities on the U.S. Gulf Coast. According to Exxon, the chemical complex will produce performance polymers used in packaging, automotive, agricultural, and consumer products for hygiene and personal care.
“Demand for performance polymers will continue to increase in China, and we’re well positioned to meet the needs of that growing market,” “We look forward to progressing this exciting project as we work to build a competitive growth platform in Dayawan,” said Karen McKee, president of ExxonMobil Chemical Company, at the unveiling of the project in 2021.
Meanwhile, last year, Saudi Aramco acquired a 10% stake in Shenzhen-listed Rongsheng Petrochemical for $3.6bn, and has entered talks to buy a stake in Hengli Petrochemical, a top Chinese producer of chemicals for plastics. Last year, Aramco-owned S-Oil broke ground on a $7bn petrochemical factory in South Korea.
By Alex Kimani for Oilprice.com
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