EPCA looks at the transformation

REIMAGINE THAT

CONFERENCE REPORT • EPCA’S 55TH ANNUAL MEETING FEATURED A SURPRISING LEVEL OF AGREEMENT ON HOW THE INDUSTRY AND ITS SUPPLY CHAINS CAN MEET ENVIRONMENTAL TARGETS

THE PAUSE IN ACTIVITY necessitated by Covid-related lockdowns and restrictions has provided time for reflection. But there is plenty of work to be done, especially if the European petrochemical industry is to be in the right place to play its part in the coming energy transition and the move towards a more sustainable, decarbonised future. That means getting everyone together to discuss the way forward – something that remains difficult.

Introducing this year’s Annual Meeting of the European Petrochemical Association (EPCA), perforce once more held in a virtual fashion in the first week of October, CEO Caroline Ciuciu stressed the need to reconnect after the pause: “It’s time to start the conversation!”

“It has never been so critical to connect our community throughout the supply chain,” Ciuciu added. “The sustainable transition requires innovation and bold leadership. The time to act is now!” Clarifying that comment, Ciuciu added that we are no longer asking why we need a more sustainable future – but how we are going to get there.

To facilitate that conversation, the EPCA team had redesigned the business sessions that have been a long-standing feature of the Annual Meeting, drawing in speakers from a wider community, especially from areas downstream of the petrochemical industry itself, as well as from the regulatory authorities – which in particular generated some sparky debate. EPCA had also been keen to widen the audience, as it sees all parts of its member companies as having roles relevant to the transition, not just the business-facing departments. All attendees – of which there were around 800 at the start of proceedings – were challenged to reimagine the future and think about what they would each have to do to bring that vision to fruition.

That is a very different challenge to that which normally faces delegates to the Annual Meeting. As EPCA president Hartwig Michels, president of petrochemicals at BASF, said in his opening speech: “Normally we would be talking about the challenging year in 2020 and what we can learn from it, the coming economic conditions and supply chain challenges. But,” he went on, referring to the meeting’s theme of ‘Future Reimagined’, “it is clear to all that industry has to reinvent itself for the sustainable transformation.”

Michels was pleased to see that the petrochemical industry in Europe is taking a ‘can do’ approach to the transition, reducing its carbon footprint and moving towards a circular economy, while still remaining competitive in the global market. But the transition will be expensive, which points

to higher prices for consumers. And Michels fi nished by calling on legislators to move away from setting targets and instead focus on creating an environment that supports the transition.

TALK TO THE BOSS Moving on to the fi rst of the main sessions, Karin Helmstaedt, the regular moderator for the Annual Meeting, noted the clear words from Ciuciu and Michels and the challenges they mentioned that lie ahead. As she pointed out, 2020 was defi ned by the pandemic but 2021 has been defi ned by the climate crisis. She then introduced Dr Martin Brudermüller, chairman of the board of BASF and also president of the European Chemical Industry Council (Cefi c), who looked at the EU Green Deal and the recently announced ‘Fit for 55’ package, which aims to reduce Europe’s emissions by at least 55 per cent by 2030, as a fi rst marker on the road to achieving climate neutrality by 2050.

“The European chemical industry supports this transition,” Dr Brudermüller said and, echoing Ciuciu’s earlier comments, added that the question is now how industry will do it – while staying competitive. There are some key requirements: industry needs access to more renewable energy at reasonable prices; and it will need a new kind of collaboration with governments and legislators.

Competitiveness will certainly be an issue; the chemical industry is being hit hard by the transformation it is undergoing, with demands for reduced energy consumption and emissions and the move towards more circularity. This is a particular challenge for small and medium-sized enterprises (SMEs).

“We need the chemical industry to meet the EU Green Deal targets,” Dr Brudermüller stressed. “The European Commission recognises that it is indispensable in providing the solutions to meet those targets.” But in which direction should innovation go? The chemical industry needs a roadmap and a formula for innovation.

“Renewable energy is key to everything,” Dr Brudermüller said, “but it has not been defi ned how it is to be delivered on an EU basis. We need more transmission capacity and inter-connectors for a Europe-wide renewable energy network.”

Given the level of cost involved, Dr Brudermüller said he feels it only fair to ask for appropriate funding for pilot projects. “Industry needs support on the transition journey,” he noted. A company such as BASF, with operations around the world, is not only impacted by the EU’s legislation, it also has to review its operations elsewhere. “China has the right idea with support and funding,” he added, saying the US is also pointing in that direction. “Europe has to follow if industry is to remain competitive.”

Dr Brudermüller closed with a call to the petrochemical industry to make more noise about what it is already doing: “We need to be visible about what we are investing in and what that provides in terms of the sustainable transformation.”

AROUND THE TABLE Dr Brudermüller’s comments fed into a panel session that demonstrated the broader palette EPCA is now working with, featuring speakers from Covestro, ExxonMobil Chemical and Maersk Ocean & Logistics. Klaus Schäfer,

PICTURE CAPTION: SECOND QUARTER TO BE

chief technology officer of Covestro, picked up on earlier comments, saying that, for the transformation to succeed in the desired time frame, we need to distinguish between the current market and ‘normal’ conditions. “Prices will not remain as high as they are now,” he said.

There are, Schäfer said, many different pathways to sustainability but the electrification of industry and growing use of hydrogen will be crucial. This indicates, for instance, a doubling in electricity consumption in Germany. If renewable electricity can be delivered at a reasonable price (say, €0.04/kWh), then that alone could drive the transformation.

Covestro is taking a proactive approach, establishing power purchase agreements (PPAs) for renewable energy in Germany, Belgium and China, in order to make its power consumption more renewable, and is also looking at reducing its energy consumption through the use of innovative technologies. In Europe, however, the limits on the availability of renewable electricity will mean that some 80 per cent of ‘green’ hydrogen will need to be imported. In itself, Schäfer said, that is not a problem: Europe already does that with oil and gas.

Loic Vivier, senior vice-president of performance derivatives at ExxonMobil Chemical, was similarly sanguine about the challenges. The first step is to mitigate internal emissions, and then to continue to innovate so that the company can supply the products needed to allow its customers to reduce their own emissions.

One current aim within ExxonMobil Chemical is to develop and implement scalable technologies, including carbon capture and utilisation/storage (CCUS) and end-of-life product management. It is also engaging with all key stakeholders. “Industry and the company must have enabling policies,” Vivier said. “Nobody has the right solution; we need collaboration and transparency. We need to listen to each other!”

There is a risk in the transition, Vivier noted, and industry has to recognise and manage that. “We need to keep our eyes wide open and keep moving forward.” He also said that industry has to be mindful of the speed of change: the transition has to happen in an orderly fashion with all players – around the world – moving in step. Finally, he echoed others in saying that regulators cannot be left to pick the right solutions; that has to be a market decision.

Coming from outside the industry, Vincent Clerc, CEO of Maersk Ocean & Logistics, observed that all players are facing a similar challenge; the shipping industry is also energy-intensive and looking at a “colossal task” in meeting emissions reductions targets. “It’s not about what we do but about how we do it,” he noted, going on to say that Maersk has pledged to be carbon-neutral by 2050, hence its recent orders for new ships to be fuelled by green methanol. The risk here is not in the technology, which is well proven, but in the future availability of bio-methanol in the right volumes and in the right places around the world. Again, he added, scalability will be crucial.

“It is very clear from our dialogue with customers that merely reducing the carbon intensity of ocean shipping is not helping them,” Clerc said. If all players in the chain are going to partner to reduce emissions, then Maersk must do more. It is already moving to electrify operations at its container terminals and warehouses and is looking at the viability of using hydrogen-powered vehicles in its sites.

Clerc was similarly keen to stress that, in many cases, it is not the technology that is lacking, rather it is scalable solutions. Improving those technologies so they can scale up will involve investment in innovation and support for such activities would be welcomed. While customers are beginning to realise that decarbonisation will come at a cost, they are not prepared to write a blank cheque.

“I am confident that we will find the solutions but it will take massive investment and brave decisions,” Clerc added. “It’s an exciting time!”

WE CAN AGREE ON THAT This far into the EPCA Annual Meeting, some themes were already firming. Collaboration across the chain is absolutely essential, and at a higher level than before. There is no single solution in any application and regulators cannot be allowed to be too prescriptive. Loic Vivier mentioned that the International Maritime Organisation (IMO) has done a good job, setting targets and leaving industry to figure out how to meet them. “We need the freedom to choose the best technology in a market environment,” Schäfer said.

The panellists were also unanimous in the benefits of a global carbon tax. “ExxonMobil has been in carbon capture for 30 years,” Vivier said. “It needs a regulatory solution to make this a market, for instance with a global carbon price.” Clerc agreed: “A global carbon tax would spark massive investment (and jobs) and create growth.”

The desired move towards a circular economy is also going to create challenges. As Schäfer noted, a lot of products last a long time, which means that any return chain will be mixed. Covestro is looking at ways of turning these products – he mentioned mattresses, car headlights, building insulation and refrigerators as examples – back into monomers. There is no point in taking them back any further as that merely increases energy consumption. Going forward, he noted, recyclability has to be designed in at the beginning.

Vivier agreed, saying that products are now being designed in such a way that they are easier to recycle. ExxonMobil has been doing a lot of work to prove its proprietary recycling technology and is now aiming to scale that up.

“IT IS CLEAR TO ALL THAT INDUSTRY HAS TO REINVENT ITSELF FOR THE SUSTAINABLE TRANSFORMATION”