Decarbonisation Technology - February 2023

CLOSE / DIVEST

REDUCE EMISSIONS

INVEST

TARGET

-6.0

-4.0

-2.0

2.0

4.0

6.0

NCM, US$/bbl

Figure 2 2021 Emissions intensity vs refining NCM for Europe for European refining sites

Emissions reductions focus on energy efficiency, adoption of low-carbon hydrogen, renewable power, and CCS deployment, along with the use of biomass/biogas for internal fuel and other such initiatives. The investment strategy for margin improvement is largely petrochemical focused, as petrochemical demand is forecast to continue to grow during the energy transition even as transport fuel demand falls. This opportunity is clearly shown in Figure 3 , which depicts the added value to integrated refiners of petrochemicals for 2021. From the middle of 2022, steam cracker and aromatic margins collapsed, driven by lower consumer demand in China and destocking in the petrochemical industry on the fear of recession. Integrated sites were not immune, but the benefits of integration remained. The record refining margins supported crude runs at

the integrated sites, pushing chemical co-products into a weak market environment, making life harder for the stand-alone petrochemical facilities. The 2023 outlook remains challenging for chemicals – despite certain parts of the chemical industry already in survival mode, it is the year of peak capacity additions in China, so margins will continue to weaken. There will still be value uplift from petrochemical integration, but it will be much more modest than in recent years. Major chemical players will focus on capital discipline and accelerate the rationalisation of smaller crackers with higher cost and higher unit energy consumption across Europe and Asia. China’s return to economic growth is a key uncertainty and a critical driver for the recovery of the petrochemical sector. Integrated sites also have a further advantage

8 10 12 14 16 18

-2

Chemicals , wt%

Figure 3 Global NCM uplift vs wt% petrochemicals by asset, US$/bbl, 2021