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Reporting back from EPCA
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CONFERENCE REPORT • EPCA’S VIRTUAL ANNUAL MEETING LACKED THE USUAL NETWORKING BUT DELIVERED PRESENTATIONS OF THE HIGHEST QUALITY AND SIGNIFICANCE
FOR DECADES NOW, the petrochemical industry has been bent on growth, expanding its market around the globe and into new end-user sectors. In the past couple of decades, that growth has had to be tinged with increasing expectations of environmental care and, more recently, with new targets for sustainability, decarbonisation and a move towards a circular rather than linear economy.
Over that period, operators in Europe – and beyond – have been able to lean on the experience and learning opportunities provided by the European Petrochemical Association (EPCA), whose Annual Meeting in particular has always offered the latest thinking in the trends that are affecting petrochemical producers as well as a gathering point where senior executives can give their thoughts and where their teams can get on with the business of doing business.
EPCA’s 54th Annual Meeting, scheduled to take place in Budapest at the start of October, was, though, a casualty of this year’s black swan event: the spreading Covid-19 pandemic. EPCA made an early decision not to hold the Annual Meeting in person, which was bad news for hoteliers and restauranteurs in Budapest as well as for the thousands who were looking forward to turning up and meeting their colleagues, suppliers and customers. But, having taken on board discussions at recent Annual Meetings about the potential for digital techniques to provide help in maintaining operations, EPCA followed other event organisers in taking this year’s Annual Meeting online.
EPCA’s Community app has been developed to keep its members in touch with one another and with the broader industry and so the ‘virtual’ Annual Meeting this year focused on presentations that would normally form the business sessions during the actual event. Those were as thought-provoking as ever and the IT held up pretty well to enable discussion and debate, while also giving the audience the chance to question the presenters and get immediate answers. In addition, and again in common with other recent events that have been forced into cyberspace, the presentations are available on the EPCA website for those members who have registered.
STEP OUT OF THE CRISIS It cannot be said that this year’s EPCA Annual Meeting was the same as those that have gone before but then nothing is the same in this most unusual of years. But, as EPCA CEO Caroline Ciuciu said during her introduction to the first of three days of online presentations, EPCA has been the primary business network in Europe for the petrochemical industry worldwide for more than 50 years and is not
EUROPE’S PETROCHEMICAL INDUSTRY COULD
about to let the Covid-19 pandemic stop it continuing to perform that valuable role.
The online EPCA Annual Meeting offered the chance for members to “step out of crisis mode for a moment”, Ciuciu said, and, with the help of expert speakers, to consider how industry will move forward in a post-pandemic world. The critical question, she said, is this: how can the petrochemical industry contribute to a smarter, circular and more inclusive economic re-emergence in an environment driven by climate change?
“How do we equip ourselves to face the new challenges post-pandemic with the same vigour we faced the crisis?” she asked. And how can industry do that while facing up to aggressive moves by the EU, through its new ‘Green Deal’, to bring a low-carbon future ever closer?
The petrochemical sector is no stranger to operating in a volatile environment and has learned that effective leadership is key if it is to continue to prosper. To examine how leadership has coped during the pandemic, EPCA had invited four senior executives from the petrochemical industry to take part in the ‘C-Suite Leadership Forum’, which constituted the business session for the first day of the Annual Meeting on 5 October.
Introducing the session, moderator Karin Helmstaedt stressed that the world we are living in this year is the ‘new normal’ and that we just have to keep calm and deal with it. The petrochemical sector is well placed to adapt to this new environment and there have been plenty of examples of companies pivoting in response to changing markets. There had been plenty of momentum on other issues evident at last year’s EPCA Annual Meeting, she said, and it is vital to keep that going. Furthermore, while the EU’s Green Deal might seem a challenge, industry has a lot of opportunity to shape how it will work.
EPCA president Marc Schuller, COO of Arkema, had a similar story to tell. In recent years the EPCA Annual Meeting has focused on the reinvention of the European petrochemical industry, in partnership with its international colleagues, for continued growth. “But no one expected the level of reinvention that would be required,” he said. Those trends that were evident last year are still there and will need to be addressed post-pandemic: an ageing population, the demand for a circular economy, the possible threat of ‘reshoring’, and coping with the energy transition over the next 30 years.
“All change presents risk,” Schuller said, “but the risk of doing nothing is greater.” The Covid-19 pandemic has offered a catalyst to speed up changes that were already in train and the post-pandemic new normal will involve constant change – it is impossible to find an end point.
BUILD BACK BETTER Introducing the speakers, Helmstaedt challenged the panel to explain how the petrochemical industry can help the world to “build back better”. The first speaker, Martin Brudermüller, CEO and chief technology officer of BASF, said that, even without the pandemic, industry is looking at a range of challenges that have not been seen for some time, especially the growing conflict between the US and China. He expects that global competition will be even more fierce post-Covid and said that Europe still has to find a role in the world.
The EU’s Green Deal – an “unprecedented political project,” as he termed it – will place new and fundamental restrictions on the chemical industry’s business and dealing with both that and the coming energy transition will likely mean that margins will stay depressed. But the industry cannot just sit back and complain – it has to be part of the solution and, while it’s about it, make sure that politicians and the public are aware of that.
BASF has developed its own strategy for the current and upcoming challenges. First is a focus on operational excellence, driving operating expenses to the edge to get the most out, while understanding that it is necessary to allow investment to drive transformation. This is, Brudermüller said, crucial for all companies.
Second is making ‘chemcycling’ a reality. Industry makes a lot of noise about circularity but there has been little in the way of concrete action, Brudermüller said. It is vital for industry to stay ahead of regulation in this matter, which will mean it will continue to have a licence to operate. The petrochemical industry, he reasoned, has to be an enabler and “a friend of the Green Deal”. He described the circular economy as an opportunity; those that oppose it will be out of business. »
MANUFACTURERS PIVOTED SWIFTLY TO SUPPLY
THE PRODUCTS NEEDED DURING THE PANDEMIC
Thirdly, BASF is using innovation in its push towards a low-carbon economy, something that Brudermüller said has to be at the top of the agenda. The necessary technology is not there yet and BASF is working hard, both on its own and with partners, to develop it. As an example he described the electrification of some of the company’s furnaces, which he said is “an exciting development”. There must also be a new approach to carbon management, to keep it in the system.
Creating transparency is the fourth imperative. Maintaining credibility is important so that customers know what chemical producers are doing. BASF has now calculated a carbon footprint for each of its products, which is provided to its customers.
Finally, Brudermüller said, “Do good and talk about it.” Trust in the industry is weak and it has to make a case for chemicals and get out of “complaining mode”. Since the EPCA Annual Meeting, Brudermüller (below) has been appointed president of the European Chemical Industry Council (Cefic) and will be in a good position to drive that message home in the industry.
LET’S COLLABORATE A transatlantic perspective was offered by Jim Fitterling, chairman/CEO of Dow. He began by saying that it seems foolish to try and look beyond the next few weeks but the signs are there. The pandemic has led to a retrenchment and a new focus on being leaner. This has led to accelerated restructuring, plant closures and delayed
investment. Operating expenditure is at new lows and capital expenditure is at a premium. The entire industry is focusing on its core strengths, which has forced a very quick pivot, he added.
But no challenges come without opportunities and those that prosper in the post-pandemic world will be those agile enough to capture them. The pandemic has accelerated trends in environment, social and governance (ESG) and digitisation and strengthened the view that ESG is crucial. All customers are pressing for more sustainable product. Dow has responded by setting new sustainability targets, including reduced carbon emissions and closing the loop on plastics. This will, Fitterling said, “unleash an unprecedented level of collaboration” both horizontally and vertically.
Digitisation has shown its worth during the pandemic and, Fitterling added, data is the new raw material. The abilities provided by smart digital systems will be an advantage for some companies.
Thomas Casparie, executive vice-president of Shell Chemicals, said that the Covid-19 crisis has made the chemical industry’s critical role in society even more apparent, especially as manufacturers reacted quickly to deliver the products needed to cope with the pandemic. But the economic impact will likely increase the depth and length of the trough the industry is already in. The supply side is also stressed, with refiners struggling to adapt. This could point to an increase in the price of naphtha, he suggested, and a likely move by refiners into the production of base chemicals. “The long-term fundamentals are robust but there are a lot of challenges,” he added.
Meanwhile, consumer behaviour and expectations are changing. There is growing demand for more sustainable, circular products. Industry has all the ingredients to be able to change and deliver those products, Casparie said, “not because we have to but because it’s the right thing to do”.
CHANGE IS NEEDED The chemical industry is one of the largest emitters of greenhouse gases and this has to change, Casparie stressed. There has been some progress but much more is needed, hence Shell’s pledge to become carbon-neutral by 2050. It also has a role in helping its client industries move to net-zero. A first step on this road is to improve energy efficiency at existing plant; Casparie reported that Shell’s Moerdijk plant is now producing the same volume of product with half the number of furnaces as it used to. It is also looking at introducing hydrogen as fuel for furnaces at other sites.
Shell also wants to be part of the solution to the problem of plastics waste, Casparie continued. Plastics material needs to have a value if it is not to just be discharged to the environment at the end of its use. Shell is currently working on using waste plastics as feedstock and is anticipating taking 1m tonnes a year out of disposal by 2025.
Collaboration is also going to be key. Innovation and risk sharing within the industry is an obvious move but this needs to go wider, bringing in authorities, NGOs and other interests. The chemical industry has to stop merely objecting to government policies and start playing a role with regulators to incentivise plastics recycling, Casparie said.
The fourth speaker was Bernard Pinatel, president of refining and chemicals at Total. Covid-19 has taught us that the world is uncertain, he began; the best way to cope is to focus on control – not just costs and cash but capital allocation, operations and safety. Diversification is also vital, in terms of sourcing, supply chains and in end markets.
