European petchem industry sleepwalking towards offshoring jobs, investments: Ineos chairman

Ineos Chairman Jim Ratcliffe has warned that the European petrochemical industry is sleepwalking towards offshoring its industry, jobs, investment and emissions.

In an open letter to European Commission president Ursula von der Leyen published by Ineos Feb. 20, Ratcliffe said the sector in Europe was uncompetitive compared with other markets such as the US, China, and the Middle East.

Ratcliffe said carbon taxes had been proven to be successful at driving away investment in the industry, and at the same time "encouraging imports from countries without carbon taxes" and increasing the carbon footprint in Europe.

Ratcliffe argued that Europe was dragging its feet in terms of carbon taxes and support for the industry, while the US has used the carrot rather than the stick approach, "via the provision half a trillion dollars of government incentives for technologies that improve the carbon footprint of the USA", encouraging investment in greener technologies.

Ratcliffe said the European petrochemical industry had once been the largest chemical sector in the world, but that it had not seen any significant large petrochemical plant builds in 20 years. Ratcliffe said it was "impossible" to renew Europe's 30-50-year-old chemical base with cleaner technology, as was the case in the US.

Looking to Europe's dependence on higher cost oil-based energy derivatives, Ratcliffe said there would be "little left" if the EU did not address the high energy costs, carbon taxes and lack of renewal in the European chemical sector.

Antwerp ethane cracker

However, Ratcliffe said Ineos had demonstrated its faith in the European petrochemicals industry through its investment in its previously stalled ethane cracker in Antwerp.

Ineos was granted a new environmental permit for the cracker project at the start of the year, opening the way for construction to resume at what the company describes as the "largest grassroot investment in the European chemical industry in 20 years."

The company said Jan. 8 that the Eur4 billion project had received the green light from Zuhal Demir, the Flemish environment minister, and that the minister's "positive decision" ended uncertainty over the project and opened the way for construction and operation of the steam cracker. Ineos said it continues to target the end of 2026 for the start of operations at the 1.45 million mt/year ethylene plant.

The carbon emissions at the new ethane cracker will be three times less than those at an average European cracking facility and less than half the emissions of the top 10% best-performing crackers in Europe, according to Ineos.

Ineos is following the model applied in the US and the Middle East and at the same trying to lower the production costs of making ethylene derivatives such as polyethylene and ethylene glycol.

Europe is dependent on costly naphtha-based feedstocks processed in ageing and inefficient petrochemical plants, while the newer, more efficient gas-based US/Middle Eastern producers are able to exploit a feedstock shale gas/ethane cost advantage of roughly 50% in favor of ethane producers. More capacity was added in 2023, and more is expected to come onstream in the next few years in the US and Asia.

European buyers of these ethylene derivatives in 2022-23 were hit by a combination of weak demand and rising interest rates, while producers were hit by inflation and volatile oil prices, pushing the cost of naphtha higher, making Europe less competitive versus the gas feedstock advantaged US and Middle Eastern producers.