Petrochemical Projects in Europe – The Last Soldiers of the Light Brigade?

On February 11, 2019 Sir Jim Ratcliffe, Founder and Chairman of INEOS, one of the world’s leading chemical companies, published an open letter addressed to Jean-Claude Juncker, President of the European Commission. This emotional appeal came out shortly after INEOS announced an investment of 3 billion euros to expand its petrochemical production in Antwerp. According to Sir Jim, the European chemical industry is currently uncompetitive due to the world’s most expensive energy, labour laws that are uninviting for employers and green taxes that prevent renewal of the industry. As Sir Jim writes: “Europe, reminds me somewhat of the Charge of the Light Brigade, immortalised in Tennyson’s wonderful poem, full of valour and good intention but the outcome will not be pretty.”

Is INEOS the last soldier of the "Light Brigade” when it comes to implementing petrochemical projects in Europe, or are other companies in the region also developing their production facilities?

The scale of the announced project is really impressive – in this generation no one has yet invested such funds in the development of the European chemical industry. INEOS’ project includes construction of an ethane-based steam cracker and a propane dehydrogenation (PDH) unit with a capacity of 750 ktpa of propylene. The new petrochemical complex will be co-located with INEOS’ existing sites in Europe producing polymers and will be connected by pipeline to a number of INEOS ethylene and propylene derivative units in the region.

The project focus on the processing of ethane is not accidental – INEOS plans to use cheap shale gas, which will be exported from the USA. A similar feed strategy is already used by the company at the Grangemouth plant in Scotland, which has been receiving ethane from the USA since 2016 as part of the Ethane Supply Project, which cost 2 billion USD.

However, INEOS is not alone in its desire to develop petrochemical production in Belgium. In October 2018, Borealis, another major player in the polyolefin market, made the final investment decision for a new PDH plant with a capacity of 750 ktpa. The facility will be located at the existing company’s production site in Kallo. The plant is scheduled to start up in the first half of 2022. 

Another example of the expansion of propylene production in Europe is the project of Poland’s Grupa Azoty – Police Polymers. The core of the project is also a new PDH plant with a capacity of 400 ktpa, as well as a new polypropylene unit. The Pomeranian Special Economic Zone, near the Szczecin port on the Baltic Sea coast, was chosen as the project's location. Start of construction and commissioning are expected at the end of 2019 and in 2022, respectively. The project cost is estimated at 1.27 billion euros.

Speaking of Poland and propylene, this year PKN Orlen, the largest Polish oil and gas company, plans to put in operation a metathesis unit at its Plock Production Plant. With the start-up of this unit the nominal capacity of the propylene plant will increase from 450 to 550 ktpa, which will increase the production of polypropylene at Basell Orlen Polyolefins, a joint venture between PKN Orlen and LyondellBasell.

In recent years, there has been a tendency among oil and gas companies in Eastern Europe to increase integration with petrochemical plants. Thus, Austria’s OMV, in its Downstream strategy 2025, besides steam cracker expansion in Burghausen by 2021, declares that the company evaluate the potential of petrochemical production at its Petrobrazi refinery in Romania, and Russia’s LUKOIL is considering a plan to construct a new polypropylene complex with a capacity of 150 ktpa at its Lukoil Neftohim Burgas refinery in Bulgaria.

However in my opinion, the project of Hungary’s MOL Group – Polyol Project - is of the greatest interest. This project is interesting because it is an example of the oil and gas company with a fairly traditional value chain planning to make big investments in specialty chemicals. In August 2018, the company reached final investment decision on the project and signed EPC contracts with Thyssenkrupp Industrial Solutions. The new chemical complex will have a polyether polyol production capacity of 200 ktpa and a propylene glycol production unit to maximize operational and commercial flexibility. It will be built in Tiszaujvaros, Hungary and is planned to be operational by the second half of 2021. The total investments are 1.2 billion euros.

The Polyol Project is considered by the company to be the first milestone of MOL 2030 strategy, implying a significant transformation of the company into a leading chemical group in Central and Eastern Europe. The target of the strategy is to gain an increase in the share of non-motor fuel products to above 50% by 2030 from the current level of less 30%.

To find out more about the European petrochemical industry and projects, please don't miss out on attending the 19th edition of IDW – International Downstream Week – organized by Euro Petroleum Consultants and taking place on 27-29 May 2019 in Sardinia - https://europetro.com/week/idw2019