When it comes to the chemicals industry, so far in 2022, it’s clear that decarbonization is the standout theme for the remainder of the year — and for the years ahead. More specific influences that could impact the future of the chemicals industry include:
An Increased Focus on ESG Standards
While the world takes steps toward decarbonization, plans and goals for cutting carbon emissions place powerful demands on the chemicals industry to reduce its share of global emissions.
As customers in the chemicals industry embark on renewable-driven transformations over the next few decades, the chemicals industry has many powerful and unique opportunities to be a critical collaborator in these sustainable transformations.
Environmental, social and governance (ESG) standards are central to the strategies necessary to meet the world’s decarbonization goals. More specifically, ESG is advancing developmental strategies tied to sustainability. For example:
- Like refiners, chemicals companies are diving into the decarbonization mix by seeking out projects that lower their carbon intensity (CI) score and by developing projects that have a renewable or recycled chemical component, or carbon capture considerations.
- Competition is forming in the chemicals industry between continuing to produce new petrochemicals and plastics more efficiently versus producing petrochemicals and plastics through a more circular approach. Numerous technologies are emerging to reuse plastic to produce fuel or new plastic. This reuse brings new challenges, including refinement of these technologies and understanding of the logistics to source the recycle feedstocks.
Conflict in Ukraine
For firms that have operations or trading work with Russia, the Russian invasion of Ukraine could result in a variety of economic and project impacts.
Since the beginning of the war, some oil and gas firms have pledged to discontinue work within Russia, and a handful of chemicals makers have ceased deliveries of chemicals. Additionally, the invasion could cause an increase in the cost of petrochemical production globally due to sanctions restricting the exports of oil and gas.
Further, the invasion has brought to attention cybersecurity threats both in the region and globally. We have seen cybersecurity attacks occur recently in the pipeline sector and at processing facilities. Chemicals companies are now able to upgrade their existing infrastructure to be more cyber resilient, and to incorporate safer elements into their designs from the beginning.
With many unknowns still in play as far as when the Russian attack on Ukraine will cease, it’s hard to tell for sure at this point how extensive its long-term impacts will be on the chemicals, oil and gas industry.
According to the U.S. Department of Energy, the lithium-ion battery energy storage industry is the fastest-growing rechargeable battery segment worldwide. Such battery production is expected to meet most energy storage demand over the next 10 years. Decarbonization trends are driving the rapid growth of lithium-ion battery demand because lithium metal is a key component of rechargeable batteries, for both electrical vehicles and energy storage.
While the U.S. has several lithium-rich sources — in brine and hard rock deposits — most lithium for batteries is sourced outside of the U.S. Over the next few years, it’s predicted that several projects within the U.S. will create steps to make the U.S. a more prominent player in the full lithium value chain. In fact, the Infrastructure Investment and Jobs Act has a focus on increasing domestic production of critical minerals by developing domestic supply chains.
Tying in the production increase and use of lithium-based batteries to future ESG considerations, the industry can expect to see a rise in the recycling of these materials for future energy storage needs.
With uncertainty likely for the remainder of this year, one thing seems clear: The number of new challenges will be met by an array of new ideas and innovation in the industry. A fundamental approach to knowledge transfer can help turn these ideas into successful projects. Scale-up, digitization and path of construction considerations will be more important than ever.
As demand for petrochemical-derived products increases, so does the need to meet environmental, social and governance goals. An integrated engineering, procurement and construction team can design and build chemical facilities focused on sustainable solutions that meet your needs.