Shell's new chemistry

After years of exiting many of its downstream chemicals and polymers activities, Shell Group now has big expectations for its petrochemicals business, according to senior officials of Shell Chemicals.

“We have recaptured the passion we had for petrochemicals,” Ben van Beurden, Shell Chemicals’ executive vice president, told a recent London briefing. “What has been described as a sunset industry now offers tremendous potential for profitability.”

This enthusiasm is, in part, driven by a declining outlook for the transport fuels market, van Beurden added: “To concentrate on making transport fuels in a world where demand is shrinking doesn’t make a lot of sense.”

Shell’s strategy now is to achieve high margin both upstream - through increased focus on feedstocks such as gas-to-liquids (GTL), LNG, methane and Syngas - and downstream by adding value to the refinery stream.

“Advantaged” gas and liquids cracking is key to chemical profitability and outperforming competitors, said van Beurden. This, he explained, means ensuring that each Shell facility has competitive advantage in terms of scale, performance and flexibility, as well as its product and customer portfolio.

Shell also aims to capture new opportunities arising in the feedstock markets. For example, van Beurden cited how a huge amount of shale gas coming on stream in North America was changing the business dynamics for petrochemicals in the region.

“All of a sudden [petrochemicals] have become profitable again in quite a few areas, actually rivalling the Middle East. So there is a lot of value for us there and we are trying to capture that,” said van Beurden.

Meanwhile, Graham van’t Hoff, vice president of global base chemicals at Shell Chemicals, said: “The Middle East can’t supply the world”. This, he said, was evidenced by the increasing complexity of projects in the region.

“New projects starting to come on stream or be talked about in the Middle East today are not pure ethane crackers. They are ethane/propane with LPG and potentially also naphtha coming in there as well. That means a future opportunity for those that are not in the Middle East to invest in É advantaged feedstocks.”

All of a sudden petrochemicals have become profitable again, rivalling the Middle East. So there is a lot of value for us to capture there

With Shell currently cutting back 15% of its refining capacity in Europe - including its Stanlow refinery in the UK, and units at Heide and Harburg in Germany - and the Americas, the way forward is clearly represented by Shell’s mega-scale projects of recent years.

These include the Shell Eastern Petrochemicals Complex (SEPC) project in Singapore, a fully-integrated refinery and petrochemicals hub. The Singapore site is based around a world-scale ethylene cracker, which can process a range of feedstocks to maximise returns as economics shift between hydrocarbon streams.

The SEPC project is Shell’s second world-scale petrochemicals project in Asia. In 2006, CNOOC and Shell Petrochemicals started up the 2,300 kilotonnes per annum (ktpa) Nanhai 50:50 joint venture complex in Guangdong, China.

The group’s biggest current project is the $19-billion Shell Pearl GTL development in Qatar - the world’s largest and most complex GTL plant, shortly due on-stream. It is designed to maximise the potential of raw materials for fuel and chemicals production.

For all the downstream cuts, meanwhile, Shell remains a top five player in the global chemicals business, although heavily focused on the production of bulk petrochemicals for large industrial customers.

Shell produces 8,000 ktpa of chemicals, including lower olefins 173 ktpa, aromatics 350 ktpa, higher olefins and derivatives 500 ktpa and styrene monomer 170 ktpa.

According to van Beurden, Shell’s “advantaged” chemicals strategy is designed to leverage proprietary technologies that differentiate it from competitors. These, he said, include promising developments such as a phosgene-free route to polycarbonate, and surfactant chemicals that enable the retention of the 30% of oil that is conventionally too difficult and expensive to recover from wells.