Oil companies are ploughing money into fossil-fuelled plastics production at a record rate – new research
As traditional demands for oil are declining as the transport sector is increasingly electrified, the oil industry is seeing plastics as a key output that can make up for losses in other markets.
Visiting a modern petrochemical plant makes you feel incredibly small. Enormous compressors roar incessantly, distillation columns tower high above your head, large pipelines full of oil and gas criss-cross the site. Heat radiates from inspection hatches in the furnaces in which the hydrocarbons are heated to 850°C to make the molecules crack. It’s easy to get lost in alleys of ducts and pipes, which to an untrained eye, all look the same.
Large tankers moor at the quay to unload cargoes of oil and gas and trucks leave at the other end, filled with plastic pellets. Tall chimneys release large plumes of flue gases from burning gas and unwanted by-products, using the energy to run the processes at the plant. At night a flare watches over the plant like a bright eye. This is where gases are combusted in case of an emergency or unexpected shutdown of parts of the plant. It’s always burning with a small flame.
Around the world, around the clock, the plastics we use every day are produced at facilities such as these on an almost incomprehensible scale. A scale so large that some suggest we now live in an era best labelled the plasticene.
And as the climate crisis worsens, plastics production at plants like these is ballooning. Modern lifestyles and practices are intimately entwined with the use of plastics. Our phones, computers, food packaging, clothes and even renewable energy technologies, such as wind turbine blades and the cables that connect them to the power grid, are all, to a large extent, made from plastics.
This means plastic demand is likely to grow for decades to come – not least in developing countries, which will account for the bulk of future demand growth. In 1950, the global production of plastic was estimated to be a mere 2 Mt (million tonnes). In 2015 this had grown to 380 Mt, and along a business-as-usual trajectory it will reach 1,606 Mt by 2050.
Unless mitigated, this growth will also incur a substantial increase in global greenhouse gas emissions – from 1.7 Gt (billion tonnes) of CO₂-equivalent (CO₂e) in 2015, to 6.5 GtCO₂e by 2050. It has been forecast that plastics and other petrochemicals, such as fertilisers and solvents (plastics make up close to 45% of the output of the sector) will become the largest driver of oil demand, accounting for almost 50% of the growth in oil demand by 2050, according to estimates by the International Energy Agency (IEA).
Why? Because the raw materials behind plastics and other petrochemicals are fossil fuels. As traditional demands for oil – vehicle fuels – are declining as the transport sector is increasingly electrified, the oil industry is seeing plastics as a key output that can make up for losses in other markets. Investing in plastics has therefore become a key strategy for fossil fuel firms.
We have researched sustainable plastics for several years. And we have long argued that the climate impacts of plastics and petrochemicals production are being neglected, as the debate so far has mainly focused on later stages of plastic life-cycles. This resulted in a research project in which we mapped and analysed the fossil lock-ins of plastics and petrochemicals.
More recently, we investigated major plastics producers and the investments they are making which are likely to increase the production of fossil-based virgin plastics around the world. We discovered that the 12 largest petrochemical companies have cumulatively announced 88 new projects for production capacity increase and infrastructure expansion between 2012 and 2019. This is indicative of a global trend of increasing investments in the chemical industry, with available data for key regions showing that total investments more than doubled from 2007 to 2019, reaching levels we estimate have not been seen before.
These new and expanded facilities will operate for decades once they are opened, adding to the current greenhouse gas emissions of the chemical industry – which are already the third largest of all industries.
Petrochemical plants of the future
On the small island of Yushan outside Zhoushan, a coastal city in the eastern Chinese province of Zhejiang, one such new mega-plant is currently being built. The mountain peaks on the island have been flattened and the island itself has been expanded into the sea by so much that on satellite images available on Google maps you can no longer recognise its shape. All of this to make way for a gigantic industrial site: Zhejiang Petrochemical Company’s somewhat perversely named Green Petrochemical Base.
The brand new site, which is in the final stage of its second development phase, is a fully integrated petroleum refinery and petrochemical production facility. Previously, these processes have typically been located in separate facilities and sometimes on different continents. The new facility will have the capacity to process 800,000 barrels of crude oil per day (enough to fill 50 Olympic-size swimming pools) making it one of the largest refineries in the world. Most of its chemical products will be common plastics, such as polyethylene for flexible packaging and key petrochemical building block molecules for the production of polyester fibres for textiles.
The Zhejiang project is indicative of a trend as oil and gas companies increasingly look to plastics and other petrochemicals as progressively important markets for their product. “The future of oil is in chemicals, not fuels,” as a headline in a trade press journal describes it. Our investigations indicate that this future is fast approaching.
Information about the industry and its growth is scarce in international statistical databases, such as those hosted by the UN Industrial Development Organisation, and only extremely aggregated data is available from trade organisations. So we spent the last year collecting data about recent projects from trade press as well as information released by the firms themselves, cross-referencing to identify unique projects. Two key trends emerged in our analysis: the move towards primarily using oil for plastics and chemicals rather than petrol, and the explosive growth in demand for US ethane, a byproduct from shale gas produced through fracking.
The first trend is most manifest in China and the Asia-Pacific region, where industry experts estimate that 70-80% of new refining capacity in the next five years will be plastics focused. The large oil firms are therefore strategically partnering with chemicals and plastics producers in the region – in the Zhejiang case described above, for example, Saudi Aramco has signed an agreement to buy shares in the firm and become a main supplier of crude oil.
The almost insatiable demand for plastics in the Chinese manufacturing industry – producing plastic car parts, cell phones, and textiles for use both domestically and abroad – has also spurred Western chemical firms to make record investments. The world’s largest chemicals company BASF, for example, is investing US$10 billion in a new site in China – the largest investment ever for the company.
The second trend has mainly materialised along the coast of the Gulf of Mexico, from Corpus Christi and Houston (the petrochemical capital of the world) in Texas to Baton Rouge and New Orleans in Louisiana. The expansion of fracking in the US has created a plentiful supply of ethane, a by-product of fracking for oil and natural gas. While ethane cannot be used as natural gas in most applications, it is an excellent feedstock for the production of common plastics – and is very cheap. As ethane production in the US has soared following the shale gas boom, so have the investments in ethane-based plastics production facilities as well as other chemicals produced from shale gas.
With new technology being developed for exporting ethane overseas, this trend quickly diffused to Europe. Adding new export terminals in the US has also recently allowed the export to reach both India and China.
The first plastics
To understand the modern plastics and petrochemical industries of today, we must look to the past. The modern chemical industry (including plastics) has a long tradition of close connections to the fossil fuel industry. It goes all the way back to the mid 19th century when the first synthetic dyestuffs and other early industrial chemicals were produced from coal tars, abundantly available from the gas works in which coal was used to produce gas for use in the quickly growing cities.
The industry emerged and developed in regions with coal resources and rapid industrialisation, such as the UK. But it was in Germany, where chemistry was a strong academic tradition and collaboration with industrialists common, that key developments were made. This led to the foundation of successful companies such as Bayer (in 1863) and BASF (in 1865) – companies that are still among the top firms in the industry. Coal remained the main source of raw materials and energy for chemicals for a century, and also for the first synthetic plastics, such as Bakelite.
In the mid 20th century, it was clear that change was coming, but in the years following world war two the direction remained uncertain – in 1949, the economist Egon Glesinger of the Food and Agriculture Organization of the UN published his book The Coming Age of Wood, in which he forecast a chemicals industry that used wood to produce its products instead of coal.
Reading this book today, it is difficult to understand that it is 70 years old: the topic is close to today’s debate about how to mitigate climate change by using renewable resources. But in the 1950s, the industry sadly went a different way, as the breakthroughs US firms had made in petroleum processing during the war quickly spread around the globe with the help of re-industrialisation aid schemes such as the Marshall plan.
This led to the era of petrochemicals, with the industry recording double digit growth during the 1960s and 1970s. Since then, the industry has expanded into using natural gas, leading to the recent turn towards using gas condensates, such as ethane from fracking. For more than 150 years, the chemical and fossil fuel industries have fostered a particularly special relationship.
Plastics and other chemicals are today almost exclusively produced from oil and gas (and in China still coal to some degree). The largest companies producing plastics are often subsidiaries of international oil and gas companies, such as Shell (Netherlands/UK) and ExxonMobil (US), or of national oil companies, such as Sinopec (China) or SABIC (Saudi Arabia). Other firms in the industry have started by producing plastics and chemicals before acquiring oil and gas infrastructure, such as INEOS (UK) and Reliance (India).
The firms in the industry rely on licensing technologies developed by global technology suppliers, such as Honeywell, who see chemicals production as a cornerstone for developing the “refinery of the future” – further cementing the connection to fossil fuels.
Although several bio-based plastics have been developed, they still make up less than 1% of the market, which is still completely dominated by the fossil-based plastics.
Plastics therefore suffer from a severe case of “carbon lock-in” – a dependence on fossil fuel resources which is continually reinforced through technology, infrastructure, institutions and behaviour.
The IPCC recently warned that irreversible effects of intensifying climate change are imminent and that the agreed targets of limiting global warming to 1.5 or 2 degrees are soon beyond reach. At this point in time, all sectors of the global economy ought to be on track to reduce their use of fossil fuel resources, especially the most energy and emissions-intensive industries, which include cement, steel and chemicals.
From energy efficiency improvements and switching to renewable energy to improving circularity and recycling, there are plenty of opportunities for the industry to invest in solutions for a cleaner environment, as identified by the IEA. Yet only very few of the plastics and chemical firms have set emission reductions targets aligned with the Paris agreement.
Many countries also continue to subsidise fossil fuels, which filters into plastics and petrochemicals production through reduced costs for fossil building blocks and energy. Addressing these discrepancies between climate targets and real-world actions in the emissions-intensive industries must therefore be a central aim of the COP26 negotiations.
There is increasing awareness of the dangers of plastic pollution. Countries, civil society and businesses are all calling for a global treaty to end marine plastic pollution. And many would like to see a more circular economy for plastics. It’s particularly worrying, then, that these petrochemical firms are seemingly so sure their enormous new investments will pay off. It indicates that they see no sign of a slowdown in the production of plastics.
Over the past two decades, there has been growing pressure to regulate plastics around the world. Plastic objects and marine plastic pollution have helped elevate plastics to the top of the political agenda in many regions. The fact that we can find plastic literally everywhere and gloomy prospects, such as the prediction there will be more plastic than fish (by weight) in the ocean by 2050, make it clear that policy responses are needed urgently.
We have identified an increasing number of public policies on plastics. But most are aimed at preventing specific objects, such as plastic bags, plastic bottles, microbeads, and single use plastic, from ending up in natural environments – not addressing the fundamentals of plastics value chains.
Addressing plastic waste and particular objects is necessary, but it is not enough. The plastic pollution prevention policies now in place will not break the wave of plastic waste, let alone alter the fundamental structure of the sector. Our research shows what drastic changes to the ways we use plastics are required to reach a meaningful form of circular economy.
The anti-plastic movement
Resistance against the industry is growing. In several locations around the world there are loud, local protests against expanding production of plastics and other petrochemicals.
In the US, protesters have successfully litigated against petrochemical production facilities. In Point Comfort, Texas, Diane Wilson, a former shrimp boat captain, led clean-up efforts of plastic pellets near a petrochemical production facility owned by Formosa Plastics. The plastic pellets, gathered over several years, were used as evidence in a lawsuit she and others filed against the company. In 2019, Formosa Plastics agreed to pay US$50 million to settle the lawsuit, in which a judge approved the settlement of the claim that the company illegally dumped billions of plastic pellets and other pollutants. In addition to the financial settlement, the company agreed to comply with “zero discharge” of all plastics in the future and to clean up existing pollution.
The outcome has encouraged another lawsuit against Formosa Plastics in Louisiana, where protesters have fought the building of new petrochemical facilities. The planned facility could roughly double toxic emissions in its local area and, according to environmentalists, release up to 13m tonnes of greenhouse gases a year. This is the equivalent of three coal-fired power plants, which would make it one of the largest pollution-causing plastics facilities in the world.
The lawsuit has for now halted the building of the new facilities. But this plant would be located in a heavily industrialised region between New Orleans and Baton Rouge, an area recognised by the UN as Cancer Alley due to the toxic chemical emissions that have affected it for decades. Toxic emissions from chemical plants have affected generations of local residents in other locations as well.
Plans for expanding plastics and petrochemicals production have also been met by local opposition elsewhere. In the Netherlands, the Plastic Soup Foundation took legal steps to try and stop plastic pellet pollution from the chemical clusters in Rotterdam and Antwerp.
In Taiwan, where petrochemicals have been a key contributor to economic development, several protests against petrochemical site have made it nearly impossible to expand.
Even in China, which has seen the most rapid expansion of the industry in recent years, protests have been organised in many cities (such as Dalian, Xiamen and Ningbo) where plans for PX (paraxylene – a platform chemical for producing PET/polyester fiber) production have been revealed. These so-called PX-protests have primarily focused on local environmental pollutants and the negative effects on neighbouring communities, which tend to be impoverished and minority communities, rather than the climate impact and fossil fuel connection of the industry.
A different story is heard in Scotland, where Extinction Rebellion protesters in 2020 blocked the entrance to the integrated petrochemical production and oil refinery complex in Grangemouth, owned by INEOS. XR protesters accused the petrochemical manufacturer of being Scotland’s largest contributor to climate change and a major hurdle for the net zero carbon emissions target set by the government. INEOS responded saying that emissions from the production in the UK were lower than elsewhere, and that the company explores ways of reducing emissions further.
The local union, Unite, has a long history of conflicts with the owner, including on the topic of fracking. INEOS already imports ethane from US shale gas and has pursued fracking in the UK, whereas Unite has campaigned against fracking. Striking a balance between securing jobs for the communities around petrochemical clusters such as Grangemouth and shutting down emissions-intensive production remains difficult, a point also recognised by the Scottish Just Transition Commission.
So local pressure on petrochemicals has, in some cases, resulted in individual plants being forced to change their practices. But they have not led to a systemic change of the sector, which continues to be locked in to fossil-based and greenhouse emissions intensive technologies and processes. Every week we spend researching the topic we seem to read more news about plans for new fossil-based production facilities somewhere in the world.
The industry is not doing enough. Only a few of the large companies have set proper targets for reducing their greenhouse gas emissions. And plans for how they will do so remain sketchy and light on detail.
Several scenarios show that deep cuts to emissions within the industry are (theoretically) possible – but rely heavily on niche and future technologies that in turn would require an unprecedented technology scale-up and renewable energy deployment. Some large firms are strategically acquiring renewable energy assets, such as offshore wind farms, to supply energy to their plants, but not yet at anywhere near the scale needed to replace all their fossil energy use. And industry trade associations continue to lobby against tougher regulations aimed at accelerating the transition.
At the same time, large firms continue to announce plans for new plants that will be larger than ever and continue to use fossil fuel resources. These facilities will remain productive for decades, emitting CO₂ far beyond 2050.
There is a great need to move beyond words and small incremental changes, and take larger steps towards low-carbon and sustainable plastics. Working seriously on how to get there entails many different changes. The industry must trust and plan for a future in which the majority of plastics will be produced from recycled rather than virgin material. As for the virgin materials used, they should come from sustainably sourced biomass and other alternative feedstocks, and all energy used must be low-carbon. Carbon capture could be a solution for the remaining fossil-based production and emissions which cannot be mitigated soon enough – including from chemical recycling plants.
At the top of their list should be collaborating with partners throughout the industry as well as researchers, decision-makers, consumers, and civil society to produce reliable roadmaps and strategies on how to transition towards a sustainable plastic system. A convention on plastic pollution is emerging, but global meetings on climate change, such as COP26, need to focus more attention on the somewhat overseen issue of petrochemicals.
Meanwhile, at Yushan island, tankers with crude oil from Saudi Arabia will dock regularly and pump their cargo into steam crackers that will run 24/7 for decades. Naming it the Green Petrochemical Base does nothing to change the fundamentals of the industry and its modus operandi. Plastics are locked into fossil resources and this connection continues to grow stronger by the day.