Core Curriculum:  Deconstructing Petchem Development in the New Carbon Economy

This op-ed was written by William I.Y. Byun, Chief Sustainability Officer, ChemOne Group.

The figures are simply staggering: over 90% of the world’s GDP ($38 trillion) is already covered by a net zero mandate.  Civil society, governments, businesses and even the scientific community are increasingly coalescing their focus on climate change, with expectations not only for grand gatherings such as the recent COP 28 peppered with nice (but toothless) non-binding MOU signing events, but for real, post-event transformative action agendas. 

In terms of energy project development, funding institutions such as private sector banks and government export credit agencies are also increasingly requiring their investments be channelled to green energy and away from traditional fossil sectors.  Especially too for a traditional energy hub such as Singapore, the challenge then is what can enterprises do to remain competitive, especially in terms of new project development.

Debating the science or arguing how the benefits outweigh the negatives, are more a rear guard retreating action than a positive dynamic for investors.  Practically though, new initiatives such as through new scientific innovations, have very long lead times and waiting for decades for such new “wunderweapons” will go stale far ahead of any actual meaningful commercial-scale deployment. 

As a result, the practical expedient is to first leverage the tools and infrastructure on hand. If we take the petchem sector, the recent spate of media and PR headlines reflect such a pivot:  the energy sector’s current trendline has been to announce project pipelines related to new renewable feedstocks and fuels such as through development projects for new sustainable aviation fuel (SAF) plants. 

Eat More Fries?

Currently, refineries produce regular aviation fuel through the cracking of traditional fossil fuels.  In terms of energy density and practical payloads, there are no other alternative energy sources.  However, if we deconstruct fossil fuels to its elemental core, fossil fuels are effectively condensed and extremely old green biomass. A practical alternative would therefore be to utilize current green biomass, already refined, to be the feedstock for the production of aviation fuel.  In other words, reuse old or used vegetable oil.

Already, such use of SAF from used cooking oil has been technically proven and is already being blended into standard fossil-derived aviation fuel or used on commercial, military and other aircraft.  With prices for SAF being roughly 300% that of conventional aviation fuel, in addition to being green, in itself, building SAF plants makes financial sense.  Hence the wave of headline announcements.

The challenge though is that there just isn’t sufficient used cooking oil to match the projected demand from all of the announced new SAF plants to be developed.  The trading spot markets have already experienced bouts where used cooking oil prices had even, at times, spiked above that of new cooking oil. 

Petchem companies therefore, would increasingly need to build out not only new standalone SAF plants, but holistic supply chains upstream, to be able to source the necessary feedstock.  While it may be a ways off before petchem companies try to run fast food chains to increase consumption of french fries, we should be able to see increasing integration upstream into the agribusiness sector.

Southeast Asia is an especially robust producer of agricultural markets for foodstuffs and other harvestable oils (such as palm), and that sector grapples with its own challenges of dealing with methane (GHG) emitting decaying waste biomass and non-sustainable production such as for palm.  Coupling SAF feedstock development may be mutually beneficial to both the region’s petchem and the agribusiness enterprises. Already, there are some nascent collaborative joint ventures and even M&A activities between petchem refineries and agribusinesses on the horizon. 

Artificial Intelligence – a low-hanging fruit?

While such macro trendlines for SAF should play out over the market in the next years and decades, in terms of short term (for example, before next year’s COP 29 in 2024), are there closer, more low-hanging fruit?

Again, if you deconstruct petchem refineries, such plants are not only the producers of refined fossil fuel products, but also the generator of copious amounts of all sorts of data related to production efficiency, sustainability metrics, financial performance.  Especially with respect to sustainability and ESG metrics, such data have suffered from frequently being generated for hodge-podge purposes oftentimes not even being consistently referenced even across the same plant’s different departments, and especially not being integrated into the framework of financial profitability.

The simplest and most straightforward emissions reduction is via efficiency, and if such efficiency could be paired with additional revenue generation, so much the better.  However, there are three challenges in particular.  The extremely fragmented and independent nature of the generated data, the gaps and “dirty” nature of such data (inconsistent and sometimes missing key junctures), and the sheer enormity of the data beyond the ability of humans to holistically and systematically harness it. All have been strong headwinds.

Concurrently with global concerns regarding climate change, has been the growing interest in artificial intelligence (A.I.). While these trends have thus far been seen as independent, the most immediate impact on emissions for petchem development, would actually come from greater utilization of A.I. Particularly in the rationalization of its own internal processes and data – across each and every plant’s processes – for greater efficiency gains through the standardization and integration of the enormous data base of a petchem plant’s operations.

Just as the more primitive and mechanical “smart metering” utilized a simpler algorithmic discipline to the power sector, A.I. and its ability to not only manage and orchestrate extremely large and dirty data, but also knowingly fill in gaps and undertake alternative process pathways, could be suitable for large petchem plants. The A.I. sector’s current debate on singularity, ie, the day when A.I. surpasses human intelligence, roughly sets that time as being in the early 2030s. 

Then for something more mundane such as petchem development utilization, how far off is it?  Already, there are discussions at the C-suite level between A.I. companies from Silicon Valley and large energy companies in Southeast Asia, and this trendline should become more pronounced in 2024.  Project funding could then be not only for new plant construction, but for major A.I. retrofits and reconstructions for all existing plants as well.  2024’s COP 29 may be even more interesting yet (even without eating more french fries).