CEH Report

Table of Contents

Abstract

The world petrochemical industry has changed drastically in the last twenty to thirty years. The United States, Western Europe and Japan previously dominated production of primary petrochemicals, not only to supply their own domestic demand but also to export to other world markets. These areas accounted for over 80% of world primary petrochemical production prior to 1980. However, world-scale construction of petrochemical facilities in other parts of the world has been on the rise. Countries with vast reserves of crude oil and natural gas (e.g., Saudi Arabia and Canada) have constructed plants to add value to their resources. Since these countries generally have smaller domestic demand, a significant share of petrochemical production is earmarked for the export market. Other countries, such as Singapore, the Republic of Korea, and Taiwan, expanded capacity during the past two decades to support growing economies and for exports to other regions that have limited capacity. Still other countries were driven by the desire for self-sufficiency because of their rapidly growing populations (e.g., Thailand, Malaysia, Indonesia and China). The start-up of these plants has effectively diminished the number of export markets available to the United States, Western Europe and Japan as the volume of imports from developing regions increased. As a consequence, the petrochemical industries in the United States, Western Europe and Japan have experienced lower growth rates. In 2010, these three regions accounted for only 37% of world primary petrochemicals production.

Fossil fuels—coal, crude oil or petroleum, natural gas liquids, and natural gas—are the primary sources of basic petrochemicals. The most important use of fossil fuels is in the production of energy. In 2010, annual world energy production from fossil fuels, hydroelectric power and nuclear power amounted to 433 quadrillion British thermal units (Btus). Of this total, 67% or 290 quadrillion Btus came from crude oil, coal, natural gas and natural gas liquids. The fraction of fossil fuel energy equivalents diverted to primary petrochemical production was an estimated 17 quadrillion Btus or 5–7% of the total consumed. Although only a small subset of world energy demand, petrochemical prices are heavily influenced by fluctuations in the world energy market.

The following flowchart provides a simplified overview of the origins and uses of olefins, aromatics and methanol:

In the petrochemical industry, the organic chemicals with the largest production volume are methanol, ethylene, propylene, butadiene, benzene, toluene and xylenes. Ethylene, propylene and butadiene, along with butylenes, are collectively called olefins, which belong to a class of unsaturated aliphatic hydrocarbons having the general formula CnH2n. Olefins contain one or more double bonds, which make them chemically reactive. Benzene, toluene and xylenes are commonly referred to as aromatics, which are unsaturated cyclic hydrocarbons containing one or more rings. Olefins, aromatics and methanol are precursors to a variety of chemical products and are generally referred to as primary petrochemicals. Given the number of organic chemicals and the variety and multitude of ways by which they are converted to consumer and industrial products, this report limits the discussion to these seven chemicals, their feedstock sources and their end uses. The regional focus of the report is the United States, Western Europe and Japan, as well as three of the fastest growing markets—China, Latin America and the Middle East. Some discussion of the demand for the seven petrochemicals is included, but it is intended only to provide some perspective on the size and general characteristics of the markets.