As China reopens and enters a post-pandemic era, several challenges are at the fore for the world's largest consumer of oil, gas and related petrochemicals.
Namely, will there be enough ethane (the main feedstock for ethylene production) from the U.S. to feed China's appetite? How will the transition from a linear to a circular, more environmentally friendly business model look 10 or 20 years from now, as the country of 1.4 billion people attempts to reach the lofty goal of zero carbon emissions by 2060?
Finally, the players in the oil, gas and petrochemical market are getting bigger—and not just the privately owned and state-owned enterprises and megacomplex refineries in China. Can China, in turn, become a force to reckon with in terms of digitalization?
A panel of five experts addressed these concerns and more March 12, the final day of the World Petrochemical Conference, hosted by London-based IHS Markit.
"We have a lot of ambitious targets," said Guanglian Pang, executive board member with China Petroleum and Chemistry Industry Federation. "We have established a production and consumption system, and by 2050 we hope we can build China into a great country, with new laws focusing on low carbon emissions and new innovations.
"But to do this, new business models and new approaches are required."
Pang said the CPCIF's model of green development; energy conversion; sustainable development; and the transition to "ecological civilizations" will take time as the world rapidly changes and at different rates. In China specifically, regulations are needed for the provinces to eliminate excessive waste.
"To achieve plastic circularity, we need to establish healthy trends coupled with new attitudes and innate laws," Pang said. "We live in a changing world, and we need to care about clean air, clean water and sustainability. In many ways, China and Europe already are on top here."
China currently boasts a 29-percent recyclability margin with its single-use plastics. "And this is not a bad figure for China," Pang said.
Technological advancements in materials science will create opportunities in different industries, and digitalization is a goal coming out of the pandemic.
"We are very keen on close cooperation with all international partners to construct a circular economy and promote plastics circularity along every portion of the chain," he said. "But there are challenges to this. How do we classify the plastics at the front end of the collection process? What are the incentives to recycle? There are a lot of headaches to be solved in China, and we must solve these headaches."
Sustainability as it relates to the environment is a major issue, as is sustainability as it relates to ethane—most of which China must import from the U.S. Ethane is a gas that comes from wells that then is transferred to production plants via chiller trains.
It is the capacity of the chiller trains that determines the capacity of ethane to be exported.
"The U.S. has more ethane than it can possibly use domestically," said Ken Squire, vice president of Energy Transfer Partners based in Dallas. "When this happens, we normally put it back into the natural gas stream where it is sold as natural gas."
In 2020, ethane production dropped during the pandemic, but it is back up to pre-pandemic levels, Squire said. He added that the forecast for total ethane recovered by 2025 is 50.3 million metric tons—more than enough to export the 6 million tons required by China, and the remaining 6 million tons required by other countries, including Canada.
However, the 12 million tons of exported ethane will require additional chilling capacity, as only about 9 million metric tons of chiller capacity exists.
"China is a major market for ethane," Squire said. "If demand increases overseas, U.S. producers can drill fairly quickly, in about 30 to 45 days they can have production."
As China's refineries address imbalances in supply, these capital-heavy megacomplexes need to optimize to be competitive.
"In the short term, startups have put petrochemical producers under significant pressure," said Fenglei Shi, a director at IHS Markit. "This could lead to rationing in the paraxylene industry for the short term. But I do want to emphasize that there still will be great opportunities for investments and trades along the petrochemical value chain."
Maximizing petrochemical production at the expense of fuel production is not always a given, if a company can institute a broad range of technical options to switch between being a fuel producer and a petrochemical maker.
For instance, integrating aromatics and PX into megacomplex refineries is possible, Shi said, using techniques that will benefit future generations.
"Most are based on existing techniques used in brownfield projects," she said. "Refineries are trying to make the most efficient use of refined gas, but it is very capital intensive."
Cui Shan, chairman and CEO of Supcon Group Co. Ltd., said the main post-pandemic challenge is the digitalization of the industry—enabling safety, quality, cost efficiency and a greener world.
"This is more about the technical reorganization at the company level," Shan said. "It is about the process, equipment, operation and automation—and the realization that the big transformation we pursue is still based on customer needs."
As such, Supcon has tried to create a business model for both offline and online businesses. Its model is an amalgam of numerous business models, a complex infusion of data that offers a "smarter plan than before," he said.
"It is not only about data information," Shan said. "We are in the process of bringing in new technologies, and all this information needs to be adapted to an 'intelligent era.' Moving from a traditional business plan to a real digital plan—that is how we will move forward."