naRTC 2026
Competitive imbalance in petrochemical market calls for North American refiners to boost efficiency
Marcio Wagner da Silva Petrobras
Current Context In recent decades, the increasing pres- sure to reduce the environmental impacts of the crude oil processing chain and the growing market, along with higher mar- gins for petrochemicals in comparison to transportation fuels, have led downstream players to adopt a strategic movement to look for closer integration between refin- ing and petrochemical assets, aiming to maximise the yield of petrochemicals. Considering 2024 as the base year, the petrochemical market size reached a total value of $659.22 billion, with an expected compound annual growth rate (CAGR) of 6.11% between 2024 and 2034, reach- ing a total market value of $1,193.26 bil- lion (see Figure 1 ). Despite these good numbers and the attractiveness of the global petrochemi- cals market, we are experiencing a period of poor margins. This is due to an oversup- ply caused by massive capital investments made by some downstream players over the past decade to maximise petrochemi- cals at the expense of fossil fuels, driven by the challenging landscape for fossil fuels. Based on data from 2019, total capital investments in crude-to-chemicals refin- eries or refineries capable of maximising petrochemicals at the expense of trans- portation fuels (a petrochemicals yield of around 50% against a standard petro- chemicals yield of 10%) were 300 billion dollars. Notably, 64% of this investment was made by Asian players, mainly Chinese companies. To highlight the potential for competitive imbalance, Figure 2 com- pares crude oil distillation capacity and integrated refinery capacity across differ- ent continents. Figure 2 shows that Asian players have a superior capacity for integrating their refining assets in comparison with other continents. As mentioned above, this advantage can translate into a significant competitive edge for them. As expected, the substantial capital investments made by Chinese companies create a competi- tive imbalance in the global petrochemi- cals market, giving Asian players a superior production capacity at low cost. This has created an oversupply crisis, putting pres- sure on other players. Recently, closures of steam cracking plants in Europe were announced due to poor profitability and low competitiveness. According to Figure 2, North American refiners have the second-largest inte- grated refinery capacity, surpassed only by those in Asia. Given the current com- petitive imbalance in the global petro- chemicals market, this is essential for the economic sustainability of North American refiners, which appear to be in a better position to compete with Chinese compa- nies than with European ones, for example. However, stricter regulations over trans- portation fuels, such as Tier 3 gasoline
Conclusion A challenging scenario for fossil fuels due to the need to reduce the carbon intensity of the crude oil processing chain and their lower refining margins compared with petrochem- icals has made petrochemical integration a business trend in the global downstream industry in recent years. The massive capital investments in crude-to-chemicals refiner- ies by Asian players, mainly Chinese compa- nies, created a competitive imbalance and oversupply crisis, putting pressure on less efficient, poorly integrated refiners. North American players rely on the sec- ond-largest integrated refinery capacity. They can compete with Chinese players by adopting optimisation strategies focused mainly on energy and asset manage- ment policies, once energy consumption accounts for more than 60% of operating costs in a typical crude oil refinery. References 1 Precedence Research, 2025. Petrochemical Market Size, Share and Trends 2025 to 2034 https://www.precedenceresearch.com/ petrochemical-market 2 Wood Mackenzie, 2023. Refinery- petrochemical integration disrupts gas-based cracker feedstock advantage. https://www.wood- mac.com/news/opinion/refinery-petrochemical- integration-gas-based-cracker-feedstock 3 IEA, 2024. Oil Market Report – June 2024. https://www.iea.org/reports/oil-market-report -june-2024 North American refiners have the second-largest integrated refinery capacity, surpassed only by those in Asia, which is essential for their economic sustainability
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Figure 1 Petrochemical market size forecast 2024-2034 1
Regional crude oil distillation unit (CDU) capacity integrated re nery capacity (million b/d)
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Figure 2 Crude oil distillation capacity and integrated refinery capacity across different continents 2
ies can be a focus for North American com- panies aiming to reduce their operating costs and lower their carbon intensity. This is particularly important given the grow- ing pressure to reduce carbon emissions in the downstream industry. It is impor- tant to remember that energy consump- tion is responsible for more than 60% of the operating costs in a crude oil refinery. It is impossible to be competitive without an adequate energy management policy in the modern refining industry. Another critical topic that needs to be part of the strategic planning of North American refiners is improved asset management strategies to minimise unplanned shutdowns, as well as better operating performance of the process- ing units, which are closely related to the energy management performance of the refinery.
requirements, place additional pressure on North American refiners, particularly those depending on fluid catalytic cracking (FCC) naphtha to compose their gasoline pool and who have lower capital power to invest in selective hydrotreaters, aiming to balance low sulphur and high-octane naph- tha. These refiners tend to look for lighter and low-sulphur feeds to reformulate their gasoline blending pool. This impacts the butane and other petrochemicals feed- stock market, potentially driving up the costs of these streams and, consequently, affecting refining margins. In this business environment, North American refiners are calling for more effi- cient operations to keep their competitive position amid the challenges posed by the current imbalance in the petrochemicals market and the oversupply crisis. Energy management in crude oil refiner-
Contact: marciows@petrobras.com.br
Strategies to enhance the profitability of unit operations
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