3.4 The petrochemical industry
The four-fold increase in the price of oil in 1973–4, together with associated political events, proved a powerful stimulus in the development and exploitation of North Sea crude oil. Increasing the price of oil does not mean that the price of the final plastic moulding increases by the same amount. For example if oil prices were doubled again then naphtha prices would typically increase by about 80 per cent, although there is no simple and fixed gearing mechanism between the two prices. The bulk of naphtha is used for gasoline with most of the balance used as petrochemical feedstock. Hence the price of naphtha at any time reflects the balance of supply with demand in both of the downstream markets.
An 80 per cent increase in the price of naphtha would mean that the price of ethylene would increase by about 52 per cent and polyethylene by about 28 per cent. A typical polyethylene pipe would cost about 12 per cent more. Crude oil and naphtha are traded in dollars. For the UK plastics producers each one per cent reduction in the value of sterling relative to the dollar raises the price of naphtha by about £1 per tonne.
However, the situation has changed with the availability of NGL (natural gas liquids) and the consequent direct cracking to ethylene and propylene. These processes were originally developed in Europe with Ekofisk NGL delivered to Teeside and shipped back to Norway. It enabled Norwegian companies like Norsk Hydro to develop greenfield petrochemical sites and gave them a headstart in polymer production. The same has happened in Scotland and helps to keep intermediate prices down through effective competition. Another development is the mixing of NGL with naphtha so that it can be fed into conventional thermal crackers, but this is an interim solution which does not realize the full intrinsic value of these feedstocks. Where petrochemical companies do not have easy access to feedstocks, there are problems both fundamental and political in nature. Companies like ICI, who obtain naphtha on the international market in Rotterdam, pay import levies which increase feedstock prices over and above what companies like Shell-Esso pay for their own UK supply of NGL. Some collaboration occurs between the large companies in petrochemicals – an ethylene pipeline from Shell-Esso's Mossmorran plant to BP's Grangemouth complex for example.
The production of monomers and intermediates is clearly tied to the market penetration and sales of particular polymers. Since the distribution of hydrocarbon structures in the feedstocks does not coincide closely with the repeat structures of tonnage polymers, there are clear problems of balancing supply with demand. Since vinyl polymers are in a mature stage of development, the demand for ethylene exceeds that for propylene with the result that polypropylene prices are much lower than they would be otherwise. Moreover, there are many unused co-products (meta-xylene is a good example) which cannot be used in quantity to make polymers. Even if new and interesting polymers based on these intermediates were developed, it would be many years before market penetration would mop up available supplies of this chemical. The trend towards polymers with high aromatic content will be helped by the high aromatic content of North Sea naphtha, although it is worth pointing out that the UK still imports considerable quantities of Middle East crude because of its high paraffin content for naphtha cracking. The difference between our own production and imports is largely exported to the USA and Germany where the higher light end content of North Sea oil is exploited to the full.
Norway has one of Europe's largest petrochemical industries, as well as a much older and very well developed metallurgical industry. Low cost electricity is produced by a network of hydro-electric power stations and enables the country to produce chlorine, a common inorganic intermediate, by the electrolysis of brine. Explain why Norway is one of the largest producers of PVC in Europe.
Figure 35 shows that PVC is made by addition of chlorine to ethylene, followed by dehydrochlorination to give vinyl chloride monomer. Ethylene will be one of the main products of Norway's petrochemical industry, and chlorine will be readily available by the electrolysis of brine. Since both intermediates are readily available at low cost, it is natural that PVC should be a staple product of the Norwegian petrochemicals industry.