Aug-2020

Waste recycling: an opportunity for refiners?

The Circular Economy has been established as the number one priority in the European Green Deal and innovative recycling technologies are helping refiners to apply the concept to downstream.

Sarah Casey
World Refining Association

Article Summary

Our new blog post explores the implications of the circular economy for refiners and the opportunities that waste recycling technologies offer, including the potential of chemical recycling.

The circular economy and the implications for refiners
in late 2019, the European Commission presented the European Green Deal and established the Circular Economy as ‘the number one priority’. Each year 25m tonnes of plastic waste is generated in Europe and over 70% of this is not recycled. Huge amounts of waste, both in Europe and globally, end up in natural environments, harming wildlife and biodiversity, with as much as 80% of marine debris being plastic. A circular economy aims to have minimal or no waste and innovative recycling technologies are helping to apply this concept to the refining sector.

A circular economy can contribute to protecting the environment by introducing new methods of waste-plastic processing which will lead to a decreased volume of plastic waste and decreased emissions, which are caused by burning it. In downstream, waste recycling technologies are becoming increasingly advanced and are providing refiners with sustainable feedstock whilst reducing their reliance on fossil fuels.

Navigating the current context is not plain sailing for refiners. They are facing tighter margins due to a declining transportation fuel market and new regulations, such as IMO which came into effect in January this year. As a consequence, downstream oil and gas players are looking for ways to reduce costs and margins to remain competitive.

Many of the globe’s refiners have noted that to increase their margins in the transition, they must increase the use of alternative feedstock and shift towards greater petrochemical production. With this move, a growing number of refiners are turning to waste recycling technologies to provide sustainable feedstock whilst reducing their reliance on the exploration and production of fossil fuels.

The consultancy McKinsey also highlighted this opportunity, stating that there is the prospect to ‘build a new and profitable branch of the industry based on recycled plastics’ and have suggested that this could represent a profit pool of nearly €50 billion per year, worldwide by 2030.

In a similar vein, Paul Hodges, Chairman of International EChem, a chemicals industry consultancy, urges refiners to embrace recycling technologies and get a foothold in the petrochemical market. Hodges highlighted the importance of low-cost US ethylene feedstock for European refiners, arguing that European producers will be placed at a disadvantage if they did not make the jump, and thus should accelerate moves to use recycled feedstock in their systems.

Innovative recycling technologies
Many refiners have already invested large sums of money into upgrading and integrating their operations and new waste recycling technologies are becoming increasingly pioneered and implemented. The term ‘waste’ includes consumer plastic waste but also by-products from the refining process, including oils, sulphur and hydrocarbon gases, all of which are being used across Europe for energy production or as a feedstock.

One form of recycling is chemical recycling, which converts waste plastics into valuable chemicals. Waste plastic can be liquefied in a thermochemical liquefaction process, which turns it into a material similar to crude oil and provides refineries with a raw material to reuse, as part of a circular process.

Drawbacks of chemical recycling are that it can be expensive and that it requires large amounts of plastic to be commercially viable. As a result of the economic cost and complexity of the processes involved, R&D is quite nascent and there are not many examples of chemical recycling technologies in refineries that are being used for commercial-scale production at this moment.

Further, due to a lack of widespread understanding of the environmental and economic impacts of the technologies, there is an absence of legislation and regulation. This is important for chemical recycling to become more widespread and to help to define the output material and distinguish that from energy recovery.

There are however lots of positives when it comes to chemical recycling. Given that chemical recycling technologies are able to purify, decompose or convert waste means the growing demand for petrochemicals can be sustained, enabling downstream players to have a long-term foothold in the petrochemical market. Furthermore, the ability of chemical recycling technologies to turn waste into new materials avoids waste, such as plastics, finding its way into natural environments and means refiners utilise a more sustainable feedstock.

Overall, the future for chemical waste recycling technologies in downstream is promising. Several pilot plants have been developed across Europe which are pioneering new processes to recycle waste, with some having recently been successfully implemented. One notable example is OMV’s ReOil Plant at their Schwechat Refinery (see list below for more information on this project and others which are showing encouraging results).

Considerations for refiners
It is important that refiners address the topics of recycling, waste, and petrochemicals. They require alternative feedstock sources to sustainably support future demand and the petrochemicals market is increasingly shaped by end-consumers who are making more environmentally conscious decisions compared to previous generations.

Waste recycling technologies will be vital in this transition as refiners produce and utilise alternative feedstock allowing for molecules to be reinvested into the value chain. For the future of refining, this will have a positive impact, resulting in reduced natural resource consumption and aligning with the EU’s sustainable narrative.