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EPCA looks to business as unusual
THE NEXT CHAPTER
CONFERENCE REPORT • EPCA’S 2019 ANNUAL MEETING REVEALED THE EXTENT AND PACE OF CHANGE IN THE EUROPEAN PETROCHEMICAL INDUSTRY AND HOW THE SUPPLY CHAIN IS RESPONDING
Like any representative trade body, the European Petrochemical Association (EPCA) has to reflect the changes in the business environment that are affecting its members. It has to move with the times and help lead its membership through the changes that they face.
So much was obvious early on at this year’s EPCA Annual Meeting, which took place in Berlin this past 6 to 9 October. For a start, the number of smokers congregating outside the entrance to the InterContinental Hotel continues to diminish, with more electronic cigarettes on show this year. It was also somewhat hazardous at times, with middleaged men in blue suits whizzing along the pavement on electronic scooters, readily available at points all around the city.
The theme of this year’s EPCA Annual Meeting was officially ‘Writing together the Next Chapter of the European Petrochemical Industry’, but president Marc Schuller, executive vice-president of Arkema France, explained it more succinctly as an opportunity to explore how the European petrochemical industry is reinventing itself in the new business environment. At the 2018 Annual Meeting, it had been suggested that industry was facing “the end of business as usual”; that has now been confirmed, Schuller said: chemical manufacturers and their logistics partners are having to work in an environment that is more uncertain, unpredictable and volatile than ever before.
FACE THE FUTURE In this environment, Schuller said, EPCA’s role has to be to support industry and, therefore, it has to focus on the next chapter, to build on the 2018 Annual Meeting’s discussions of the implications of the move towards a low-carbon future. “Youth is calling for transition,” Schuller said. Industry has to embrace this new pace of change and be ready to meet the extent of the ambition for change.
It is not necessarily a transition to be afraid of; paradigm shifts can open up major opportunities, Schuller said, and the petrochemical industry is well placed to provide the products needed to move towards a sustainable world. His comments were picked up on by the event’s moderator, Karin Helmstaedt, who reminded the audience that it was now 30 years since the fall of the Berlin wall, which was supposed by some to be a marker of the ‘end of history’. And yet, today turbulence is the overriding background. “In turbulent times, Europe needs to focus on its strengths,” she said. In particular, that means its huge, well educated and highly skilled market. »
RAPID EXPANSION OF THE ANTWERP PETROCHEMICAL
The EPCA Annual Meeting took place just ahead of the arrival of a new European Commission, which is expected to be tougher on climate change issues than its predecessor. “Businesses need to look at how they are responding,” Helmstaedt said. “Standing still is not an option.”
MAKING PROGRESS To avoid standing still, it is worth knowing where we stand now so we know when we are making progress. “Economics is the study of progress,” explained Paul Romer, joint recipient of the 2018 Nobel Prize in Economic Sciences and former chief economist at the World Bank, and ‘economics’ can also explain why progress is good to have. He also posited a question to the audience: “What costs are you willing to bear now to provide your grandchildren with the world you want them to have?”
We live in a world of almost infinite possibilities, Romer said, limited only by finite resources. One thing that ‘progress’ can achieve is to make more out of those resources: Romer gave the example of the switch from the vacuum tube to transistors, which revolutionised the electronics sector and enabled a vast expansion in the availability of products with a much lower impact on energy demand and resource consumption.
On the other hand, one measure of progress is life expectancy; after rising consistently in the developed world, the trend has stalled in recent years. Romer pondered why this should be, moving seamlessly into his main thesis, which is that the ‘market’, left to its own devices, will deliver some outcomes that are deleterious to humanity, society and the environment. It is the nature of industrial corporations that they concentrate on activities that are profitable; some of those will be beneficial to people and the planet, others will not; further, there are unprofitable but beneficial activities that will be overlooked.
“Governments play a role that the market cannot,” Romer said. Markets cannot be relied upon to achieve ‘progress’ and sometimes there is a need for a government that is firm and is willing to say ‘no’ to companies whose profits derive from activities that are harmful. The world has done this with chlorofluorocarbons (CFCs), which had been identified as the primary culprits behind the growth of the hole in the ozone layer, and the world, via its governments and supra-national organisations, now need to do the same with greenhouse gases (GHGs). There must be an incentive to reduce GHG emissions and, once that is in place a solution will emerge, Romer said.
He was critical of the economic mainstream that emerged in the 1980s, with its mantra that “government is bad”. Getting government out of the way has allowed the market to pursue harmful but profitable activities. “We’ve lost the capacity to say through our governments: ‘no, you can’t make money doing things that are harmful’,” Romer said, before concluding: “We don’t need less government; it’s in our interest to have our industry tightly regulated.”
WHAT INDUSTRY CAN DO Joining Paul Romer on the stage at the opening session of the 2019 EPCA Annual Meeting was former EPCA president Tom Crotty, director of the Ineos Group, who gave some examples of ways in which his company is using technology to ensure growth in the future. In the short term, there is a pressing need to renew ageing assets, of which there are plenty in Europe. Ineos is taking a lead, investing €3bn in ‘Project One’, which will see construction of a 2 mta olefins plant in Antwerp, using low-cost propane and ethane feedstocks. This is, Crotty said, “the largest investment in the European petrochemical industry in a generation”.
Secondly, the drive towards a circular economy implies development of ways to achieve the chemical recycling of plastics – taking them back to the molecules – as mechanical recycling has its limits. Chemical recycling, on the other hand, has the potential to retrieve 100 per cent of plastics material. Achieving that potential will take time and the development of an integrated supply chain – where governments will have a crucial role.
EPCA PRESIDENT MARC SCHULLER: “INDUSTRY
Ineos is examining a range of technologies and has also shown that, in the laboratory, it is possible to turn used yoghurt pots back into virgin polystyrene.
The emerging hydrogen economy is a “real opportunity” for the petrochemical industry, Crotty continued. Ineos currently produces hydrogen as a by-product of some processes and already uses it internally as a fuel; this may help point towards a model for a hydrogen fuel market and Crotty said Ineos is already active in several industrial and transport projects involving hydrogen in the UK, France and Norway.
Patrick Labat, senior executive vice-president, northern Europe, of Veolia confirmed some of Crotty’s points, noting that the European petrochemical industry has been so successful for many decades and has revolutionised the way we live; in the process of doing so, it has also taken plastics everywhere, even to places where there is no means of managing the waste streams. As a result, the petrochemical industry is seen as being the party most responsible for plastics pollution in the world’s oceans. “In fact,” Labat said, “all links in the chain are responsible.”
In early 2019 the Alliance to End Plastic Waste (AEPW) was formed, with broad participation on the part of petrochemical producers. Labat showed some examples of projects that have already been set up in south-east Asia to collect and recycle plastic waste and noted that “nobody has the whole solution, but together it’s possible”.
Indeed, the petrochemical industry needs to find more ways to use recyclate, otherwise there is no incentive to recycle plastics waste. This would also help industry reduce its carbon dioxide emissions, though it will also need to look at energy efficiency and alternative energies if those emissions are to be reduced to an acceptable level, Labat said.
AROUND THE TABLE One innovation at this year’s EPCA Annual Meeting was a ‘Digital Café’ session devoted to digitisation and sustainability in the chemical supply chain. This followed on from work undertaken by Vlerick Business School and EPCA over the previous three years. Opening the roundtable session, Prof Ann Vereecke, partner at Vlerick Business School, highlighted the fact that climate change »
protests were happening in Berlin that very day and that ‘sustainability’ represents the next wave of environmental priorities.
Since Vlerick Business School started working with EPCA, a lot of progress has been made and Vereecke said she was “impressed by the speed of change” in terms of the digitisation of the petrochemical supply chain. However, she added, both industry and consumers now expect that the supply chain will be more sustainable. The question for the workshop was: can digitisation enable sustainability? Would a move from a linear to circular economy present a threat or provide an engine for growth?
Those who attended the Digital Café were invited to break into small groups to discuss the space where technology, sustainability, the circular economy and petrochemical supply chains meet. After reports from table representatives, the preliminary results were collated and presented back to the group by Prof Vereecke.
Sustainable value comes from increasing asset utilisation and from eco-efficiency, and industry is busy working on that, Vereecke said. However, it has not been easy to find examples of life extension projects or looped materials in the petrochemical sphere. Furthermore, she said, sustainability is becoming a more important driver for digitisation in the supply chain but it is not the biggest.
Indeed, the discussions brought up once more some of the barriers to greater collaboration that have thus far hindered a more rapid uptake of digitised networks within the industry, not least the need for standards and for a willingness for partners within the sector to trust each other with their data. As before, it is clear that pressure for digitisation is coming from the consumer, not from within.
The main focus of the digitisation process is to increase transparency and this can generate both optimisation within the supply chain and eco-efficiency, Vereecke said. Collaboration is important, she added, noting also that start-ups can offer learnings for industry – but that industry should not sit around and wait for them to emerge.
PEOPLE FOR THE JOB It was clear elsewhere at the EPCA Annual Meeting that sustainability is a consideration that cuts right across business operations. EPCA’s Talent and Diversity Inclusion Council (TDIC) confirmed that by basing its business session around the topic of sustainability leadership, with Stephen Hahn-Griffiths, chief reputation officer of the Reputation Institute, pointing out that this goes back some 15 or 20 years. Initially, the idea of ‘sustainability leadership’ concentrated on the environment but soon spread to cover the impact of operations on humanity, which coalesced into the concept of Corporate Social Responsibility (CSR).
More recently, there has been an attempt to address the balance between business and responsible behaviour, meaning that sustainability leadership is directly tied to the bottom line. And the idea of the ‘triple bottom line’ – people, planet, profits – has given way to ‘purpose’: why does a company exist, and what are its morals?
CSR is now incorporated into the scrutiny given by investors, analysts, media, governments and the public, so cannot be ignored. The petrochemical industry is showing an improvement in its ratings for sustainability leadership, Hahn-Griffiths said, but it still does very badly compared to other industrial sectors. It is therefore time for action. “Be the kind of leader you want to follow,” he advised. “Take the initiative – don’t wait for the CEO to decide!”
Anyone can be a sustainability leader, it doesn’t have to be the CEO, agreed Prof Wayne Visser, holder of the BASF-Port of Antwerp Randstad Chair in Sustainable Transformation at Antwerp Management School (AMS), who reported on a study carried out by AMS and EPCA. Sustainability leaders need certain characteristics, which cannot be taught: they should have intrinsic motivation, display trustworthy behaviour, and show moral courage. They also need some capabilities that can be learned, such as ‘sustainability literacy’, visionary engagement and an ability to communicate openly.
ON THE RIGHT TRACKS Of most interest to HCB readers was probably the business session on supply chain issues, led for the first time by Dirk Verstraeten, director of global logistics procurement at Covestro Deutschland, who took over the chairmanship of the EPCA Supply Chain Programme Committee (SCPC) from Bertschi’s Johan Devos earlier this year. Some might have thought that this session would veer away from sustainability when Verstraten began by saying: “Today the focus is on hardware,” but he went on to explain that the momentum within the supply chain is all about rail.
With containerships getting ever larger – the latest generation can carry around 23,500
20-foot containers – how can a port such as Antwerp cope with the rising volume of freight passing through its terminals? And there is more to come: Ineos is not the only chemical company to be planning investment in production capacity in Antwerp. In addition, recent problems with water levels on the Rhine have exposed the vulnerability of the German chemical industry to transport disruption in inland waterways.
All this points to a need to move freight onto the rails. “Can EU legislation help in developing rail capacity?” Verstraeten asked. “Let’s rattle the cage!”
First to take up that challenge was Peter Klaus, retired professor at FriedrichAlexander University, who explained that ‘infrastructure’ is not just about physical assets, it’s what frames and channels (and restricts) logistics flows, and what determines the success of logistics businesses. “But it’s outside your control,” Klaus said.
The petrochemical supply chain – or, rather, network – is extremely complex, covering a wide range of consignment size, transport mode, and full- and less-than-truckload movements. This network is very asset-heavy and slow to change, and based on processdriven technology.
KALEIDOSCOPE VIEW The petrochemical supply network is multi-dimensional, Klaus said, not only in terms of its physical and IT infrastructure but also the legal and regulatory framework and ‘soft’ infrastructure – the social and cultural forces the shape the world in which it exists and which allow it to function. It is, though, facing some severe challenges, congestion on the roads and rails and in terminals, “enormous” compliance demands, and the need to reduce fuel consumption and emissions. In the future, the picture will be complicated by selected public investment and by developments in technology, such as autonomous vehicles, platooning, smart roads and so on.
However, there is currently an enormous backlog in maintenance across the transport networks, which will soak up a lot of the investment coming into the sector, and it will take time to make these changes. Europe faces constraints in terms of the availability of land for expansion of the network and is also beset by some over-optimistic expectations.
Help may be at hand, though: growth in transport demand in Europe is levelling off and, in terms of capacity growth, bottlenecks are being removed. There is, Klaus said, also a high level of awareness of the ability of digitisation to make a difference, along with growing political support for the transport sector. Take-up of digitised solutions is being held back by a lack of standards, the risk of cyberthreats, a global shortage of the necessary talent, and a brake from the culture of the petrochemical industry: the petrochemical logistics sector works on long time scales and its people have been trained to think within the established framework.
Klaus concluded with what he called some “obvious” messages: businesses need to take a 360-degree view to see what’s coming at them; don’t try to control everything – decentralise and devolve operations and decision-making; and resilience will depend both on investment in hardware and a willingness to adopt a new mindset.
PORT TO RAIL As Antwerp had been mentioned several times already, it was fortuitous that Jacques Vandermeiren, CEO of the Port of Antwerp, was on hand to report on current and future developments. The port is looking to double the proportion of freight moving by rail by 2030; the question is: how? It should be achievable, he said; currently only some 7 per cent of freight moving through the port goes by rail, compared to as much as 40 per cent in Hamburg, which suggests there is room for growth and plenty of opportunity for rail operators.
To achieve a modal shift, though, the port must move from being a passive landlord to being an active community builder. A lot of ideas have already been thrown into the ring and some of them – hydrogen-powered tugs, a coalition on carbon capture and sequestration/ use, for instance – have already been given the go-ahead. But Vandermeiren is aware that concrete solutions need to emerge urgently if the port is to hold onto its licence to operate.
Any talk about rail transport in Europe inevitably turns towards intermodal transport and Bernhard Kunz, managing director of the Hupac Group, was well position to inform the discussion. Hupac was founded in 1967 and is now moving nearly one million road transports onto the rails every year. Kunz agreed that maintenance has suffered over many years, but the work that is now being done is not being coordinated across Europe, leading to local capacity problems. As with road transport, the rail sector is also facing a driver shortage. The Rastatt closure in 2017 highlighted the problems of accessing a Europe-wide solution when drivers cannot »
THE EPCA ANNUAL MEETING OFFERS A PLACE
FOR THE WORLD’S PETROCHEMICAL INDUSTRY
