Philippe Peccard of Linde

If you want to be cost competitive in petrochemicals and refining, you have to optimise your hydrogen network.

Linde Abu Dhabi

The outlook for olefins

February 26, 2019

Philippe Peccard, managing director of Linde Engineering Middle East, talks to TOGY about the outlook for the global olefins market, potential in hydrogen mobility and the evolution of trends such as consolidation. Linde Engineering is an EPC contractor focused on the production of hydrogen, synthesis gas, oxygen, nitrogen and olefins, as well as plants for natural gas treatment.

This interview is featured in The Energy Abu Dhabi 2019

What is Linde’s outlook on the global olefins market?
The most market growth we see is in Asia, with China and India, and perhaps in 20 years we will see this expand into Africa in terms of demand for basic plastics. The manufacturing of all of the plastic polymers that come from olefins is done locally in China and India. But the main export bases for those huge markets are going to be first, the Middle East, and second, North America.
North America is becoming the big player in gas with increased fracking activities in its unconventional gas plays, while the GCC region, primarily in the UAE and Saudi Arabia, is richer in liquids such as crude oil and conventional gas.
There is a conversion of the product base from pure gases into a mixed-fit feedstock and liquid feedstock to produce olefins. The GCC region has the opportunity to dive deep into the value chain, pushing C4 and aromatic conversion in order to be able to be competitive in exporting very advanced chemicals into markets such as India and China.
The oil and gas players in the GCC will rely on those more complex chemicals going very deep into the downstream integration. We will see how successful it will be. These are very capex-demanding projects. The success of the first project will pave the way for success and future growth in this region.

What is the future of hydrogen gases locally and globally?
For hydrogen there are two big markets. First is the refining and petrochemicals side, which requires a lot of hydrogen to be competitive and become fully integrated. In the local market, the hydrogen infrastructure is being developed so that refining petrochemicals will boom in the next 10 years.
That is not only about installing the systems you need to produce hydrogen, but about integrating the source gases and their use by consumers. This needs to be integrated in a smart manner through networks and tools that permanently optimise the production and consumption.
Hydrogen is energy, by definition, and if you want to be cost competitive in petrochemicals and refining, you have to optimise your hydrogen network in the same way that you would optimise your consumption of crude oil or natural gas. It is not simply the transformation of crude oil and natural gas.
This is coming in the region in terms of new investments over the next decade and in terms of tools and skills that need to be imported from highly developed integrated petrochemical sites. We are already recruiting experts in Europe, and our merger with Praxair will help in this process. We want to bring this activity and knowledge to the UAE, not only in terms of how to bring the best assets but in terms of how to operate those assets with the right tools and business models and to offer that to our partner ADNOC.
Secondly, we will see that hydrogen mobility is one of the biggest options for the future. Nobody knows whether cars will switch to electric, or to using more traditional but lighter fuels, or to hydrogen mobility. There are a lot of forecast studies, but no one knows what the automotive industry will look like in 10 or 12 years.
I believe that you will have a portfolio of mobility technology in the future, depending on differing needs country by country and city by city, and hydrogen mobility will be a part of that. The Middle East is one of the great potential long-term markets for hydrogen mobility technology, and ADNOC is working, along with other parties in the region, on ways to transport hydrogen to consumers and to make it easily usable in cities in a cost-competitive manner.


Is this idea of hydrogen mobility economically scalable?
We need to find the right chemical concepts first. We need to determine how we will store the energy, be it fossil or renewable energy. As of now, fossil fuels have the best options for storage. You could produce a huge amount of hydrogen or a hydrogen equivalent out of fossil energy and make it green by putting the CO2 in the right place. Then you can transport that to where the market is, which at the moment is in Europe and North America, but most importantly in China, Korea and Japan, and in the future in India and here regionally.
The question is: What are the right molecules? Pure hydrogen is possible, but it is not easy to store, nor to transport in a cost-effective manner. The technology exists, but it is not so cost competitive as of yet. There are other means that companies, including ours and the big energy companies, are researching and developing to bring storage costs down.

What is the focus of your joint venture ADNOC Industrial Gases?
The main purpose and goal of this company is to supply industrial gases to the ADNOC companies, starting with air gases such as oxygen and nitrogen, but also other industrial gases, for the development of the downstream and upstream sectors.
The new 2025 vision for ADNOC as expressed by [CEO] Sultan Al Jaber is to invest USD 45 billion to develop what will soon become the largest integrated refining and petrochemical complex in the world. As part of that vision, industrial gases is one of the key functions that will have to grow and integrate to realise this plan.
ADNOC Industrial Gases is working on developing concepts, including investment that can support this vision, and we hope to see projects which will contribute positively as part of the overall development.

How do you see the market evolving in Abu Dhabi and regionally?
The market must decide what sectors to consolidate moving forward. You see the same situation happening in Saudi Arabia. Aramco has announced that they intend to acquire SABIC. This might involve not only buying shares but some restructuring of the downstream industry.
ADNOC has recently restructured its operation and centralised key decisions in terms of project developments and partnerships. I would not be surprised to hear of more consolidations from ADNOC in the next three to five years. And one should not be surprised to see consolidations throughout the region in the next 10-15 years, beyond the borders and the citizenship of the companies. This trend will continue. This is driven by the market conditions: Competition is high and feedstock advantage is not sufficient.

Will ADNOC and Saudi Aramco continue to co-operate?
I believe that they will co-operate more and more, first of all in their overseas expansion. Both companies target hedging their crude oil against long-term market risk by expanding into petrochemicals.
They are both very interested in developing new technologies that secure their long-term competitiveness. On the production side, they want to make sure that they are moving from gas to liquid feedstocks. Meanwhile, they want to develop the application in their target market so that they can best place their products.

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