Fueling Plastics – How Fracked Gas, Cheap Oil, and Unburnable Coal
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Fueling Plastics How Fracked Gas, Cheap Oil, and Unburnable Coal are Driving the Plastics Boom • Fossil fuels — oil, gas, and coal — are the primary materials from which almost all plastics are made. • Cheap shale gas in the United States is fueling massive new investments in plastics in- frastructure in the US and abroad, with $164 billion planned for 264 new facilities or expansion projects in the US alone. Many projects, including the largest, remain in the construction or planning stages and face significant public opposition. • China is also investing heavily in plastics infrastructure, including heavy investments in expensive, carbon-intensive coal-to-olefins technology. • The fracking boom is also fueling new plastics plants in Europe, which will rely heavily on American natural gas. • A recent wave of plastics investments in the Middle East will further intensify the indus- try’s search for new plastics markets and its efforts to increase plastics consumption. • By 2025, production capacity is expected to increase by 33-36% for both ethylene and propylene. If constructed, this massive expansion in capacity could lock in plastic produc- tion for decades, undermining efforts to reduce consumption and reverse the plastics crisis. Excess production and consump- marine environments, coastal com- ing a massive investment in new up- tion of plastic, especially single-use munities, food chains, and more, stream plastic production facilities plastics commonly used in packag- harming people and the environ- which, if constructed, will produce ing, is causing widespread contam- ment upon which they depend. the fundamental materials from ination of the environment, includ- which most other plastics are made. ing pervasive plastics pollution in Recent shifts in shale gas develop- This new wave of US investment fol- the world’s oceans. This issue affects ment in the United States are driv- lows recent or ongoing expansions How Fracked Gas, Cheap Oil, and Unburnable Coal are Driving the Plastics Boom | 1 | Center for International Environmental Law Ethylene and Propylene Ethylene is the most important base chemical in the plastics sec- tor.4 Ethylene is produced primarily from natural gas liquids (NGL), a by-product of natural gas explora- tion, or from naphtha, a product of crude oil refining.5 The choice of feedstock is geographically based — because natural gas is hard to transport, NGL are used primarily in North America and the Middle East, where natural gas is abundant.6 Naphtha is primarily used in China and Western Europe.7 Ethylene is a commodity chemical, bilyjan/Pixabay and its competitiveness is based on cost. Because approximately two- in China, the Middle East, and oth- gas boom in the United States and thirds of the cost of ethylene is the er parts of Europe and Asia. As the underutilized coal in China. cost of the energy inputs required for world works to address the growing its production, the relative competi- crisis of plastics in the environment, Although there are many kinds tiveness of ethylene producers using oceans, and human bodies, it must of plastic, the five “standard plas- NGL versus naphtha correlates to simultaneously confront the role tics” constitute approximately 85% the relative cost of gas compared to of expanding plastics production of world plastic consumption by oil. Currently, the cheapest produc- 1 in that crisis. If these facilities get weight. These five plastics are: ers are in the Middle East, followed 8 built, they may lock in a world of by the United States. • polyethylene (32% of glob- even cheaper, more ubiquitous, and al demand); After ethylene, the most important more disposable plastics for decades • polypropylene (23%); chemical building block of plastics is to come. • polyvinyl chloride or PVC propylene.9 The cracking process for (16%); both NGLs and naphtha have tradi- From Fossils to • polystyrene (7%); and tionally produced propylene along- Plastics • polyethylene terephthalate side ethylene. However, many of the or PET (7%).2 new ethylene production facilities, Fossil fuels — oil, gas, and coal both those planned and in use, are — are the primary materials from Propylene is the primary feedstock designed only to process ethane, the which almost all plastics are made. for polypropylene; ethylene is the primary component of NGL. This Because the cost of fossil fuels rep- primary feedstock for the other process produces almost no propyl- 3 resents a large share of the cost of four. ene and has led to concern regard- plastic, trends in fossil fuel markets ing the “propylene gap” (propylene The majority of plastic production heavily influence where companies production in the United States fell by weight, and much of the future choose to invest in new production 40% from 2005 to 2012).10 Chem- of the plastics sector, can therefore facilities and which facilities they ical companies are now building be understood by looking specifi- try to build. The two main drivers “on-purpose propylene production” cally at trends in propylene and eth- of investment today are the natural (OPP) plants to make propylene di- ylene production. How Fracked Gas, Cheap Oil, and Unburnable Coal are Driving the Plastics Boom | 2 | Center for International Environmental Law rectly, instead of as a co-product of increase in production capacity and Dow Chemical recently finished ethylene production.11 a geographic expansion of produc- construction on its own $6 billion tion facilities. Beginning in 2012, project in Freeport, Texas,19 and Oc- It is also possible to produce eth- cidental Petroleum just opened its ylene and propylene from coal, al- It is difficult to overstate $1.5 billion ethane cracker in Ingle- though this is rare outside of China. side, Texas.20 However, China is investing heavily the significance of the in its coal-to-olefins technology, and natural gas boom to the These investments are not slow- this process may expand to become plastics industry. The ing. In April 2016, the American a more significant contributor to the Chemistry Council announced that ethylene and propylene markets.12 change has been described by 2023 the chemical industry will as a “once-in-a-generation spend over $164 billion on 264 new United States opportunity” and a “com- facilities or expansion projects in the 21 ing renaissance” for North United States. At the time, more The increased availability of cheap than half of the projects were still natural gas in the United States has American plastics. in the planning phase,22 with sev- led directly to a drop in the cost of eral new projects announced since production for ethylene, as ethane the petrochemical industry began then.23 For example, in March 2017, (the primary component of NGL) making significant investments in Total announced a $1.7 billion joint is similarly cheap and abundant. It ethylene production capacity in the venture with Borealis and Nova to is difficult to overstate the signifi- United States to take advantage of build a new ethane cracker in Port cance of the natural gas boom to the cheap chemical feedstocks.17 Arthur, Texas, as well as a new poly- plastics industry. The fossil fuel and ethylene plant in Bayport, Texas.24 plastics industries view the change For example, Chevron Phillips has almost completed a $6 billion ex- The American Chemistry Coun- as a “once-in-a-generation opportu- 18 nity” and a “coming renaissance” for pansion in Cedar Bayou, Texas. cil expects investment to continue North American plastics.13 The pres- ident of the American Chemistry Council — an industry organization that represents major petrochemical companies and plastic resin produc- ers in the United States14 — further stated, “Thanks to the shale gas pro- duction boom, the United States is the most attractive place in the world to invest in chemical and plas- tics manufacturing. It’s an astonish- ing gain in competitiveness.”15 Some within the industry are less certain about the prospects for fu- ture investment and question the long-term prospects for major new investments in increasingly saturat- ed markets.16 Still, this internal in- dustry disagreement is not slowing skeeze/Pixabay down investments in the US. This “renaissance” of North Amer- ican plastics is leading to both an How Fracked Gas, Cheap Oil, and Unburnable Coal are Driving the Plastics Boom | 3 | Center for International Environmental Law Flooded refinery storage tanks after Hurricane Harvey, Port Arthur, Texas Aaron Sprecher/Greenpeace at over a billion dollars annually The American Chemistry through at least 2024, peaking at States were located outside of Texas Council projects the chem- 33 over $9 billion in 2019.25 or Louisiana. ical industry will spend Among the largest group of projects $164 billion on 264 new In addition to the facilities them- in the US Gulf region is a joint ven- selves, fossil fuel and chemical com- ture by ExxonMobil and Saudi Basic plastics facilities or expan- panies are investing in pipelines to Industries Corporation (SABIC). sion projects by 2023. move chemical feedstocks. For ex- The deal was inked in Saudi Arabia ample, one $2-3 billion pipeline during the Trump Administration’s alone.31 Before the shale gas boom, proposed in Pennsylvania has been first overseas trip, and with Rex Til- many of the crackers in the United dubbed the “Plastics Pipeline” by lerson — former CEO of ExxonMo- States were capable of processing the extensive movement of com- bil, now the US Secretary of State either naphtha or NGLs. Several of munities and organizations oppos- 34 — in the room.26 The $20 billion those crackers were forced to close ing it. The plastics boom is also initiative proposes “11 major chem- due to the relative competitiveness driving investments in new export ical, refining, lubricant and liquefied of European and Asian producers. infrastructure. The Port of Hous- natural gas projects,”27 including a The new facilities being constructed, ton alone is investing $700 million $10 billion ethane cracker — the in contrast, are typically only capa- in expansions to accommodate the 35 largest in the world — to be built ble of processing ethane and can- plastics export boom.