Why SEA is the ideal hub for crude-to-chemicals’ next phase


In response to growing demand for petrochemicals products and the glut in oil prices, APAC operators have had a chemical reaction: the region’s oil to chemicals market is expected to register a CAGR of 4.25% within the next five years

Crude to chemicals is not just a short-term lifeline for traditional downstream operators, it could be a long-term survival strategy. 

Asian Downstream Insights explores how the next phase of downstream’s crude-to chemicals development, and why Southeast Asia is fertile ground for growth. 

The rise and rise of Southeast Asia 

When it comes to dominating the growing chemicals market, Asia has made first moves. The region is the leading contributor to the world’s specialty chemicals economy, holding a significant revenue share of nearly 36%. 

Almost half of that comes from China, where, over the last decade, the Asian superpower has been slowly bolstering its crude-to-chemical prowess. Following the oil price collapse of 2014 – 2015, the country launched a new wave of integrated petrochemical and refinery investments. Four years later,  Hengli Petrochemical announced the operational launch of its 20 million tonnes per year refinery and petrochemical complex in Dalian, capable of producing 14 million tonnes of chemicals with 20 million tonnes of crude oil. 

But smaller Asian countries also have large ambitions, and they are attracting international interest. Saudi Aramco has identified the region’s emerging economies as a key target for boosting its chemicals investments. 

“We are pursuing opportunities for partnership in many Asian countries such as India, Malaysia, China and South Korea to build on and grow our business as a crude supplier and a downstream investor,” said Abdulaziz Gudaimi, Senior Vice President of Downstream at Saudi Aramco, in a recent interview. 

For Linde, Southeast Asia has been a long-term fertile ground for opportunity. In 2017, the company pledged €30 million (c. US$ 36,088,200) into expanding gas and liquid capacities in central Malaysia, to address growing regional demand. That year, they also launched Southeast Asia’s first automated cylinder filing plant in Banting. 

Positioning for petrochemicals 

Southeast Asia’s socio-economic landscape makes it an area of attractive petrochemical potential. A growing young population, and a rising middle-class with an estimated US$300 billion of disposable income across Malaysia, The Philippines, Thailand and Vietnam alone, means the region is rich in potential workforce, consumers, and capacity for growth. Even following the hit of the pandemic, the region’s economy is already predicted (slow) recovery from this year. Petrochemical operators are expecting increased market capacity in the near future, and  major downstream operators are already leveraging refinery-petrochemical integration to position themselves at the heart of this market. 

The Petrochemical 4.0 vision

Shifting the spotlight to petrochemicals will provide more than short-term economic survival. As the Bangkok Post, and others, have observed, “economic and social turbulence [of the pandemic] accelerated digital transformation and reinforced emphasis on sustainability”. 

Moving towards a Petrochemical 4.0 vision will allow operators to maximise the long-term returns of both operational and commercial sides of their business. Increased integration between traditional refiners and petrochemical complexes allows for petrochemical production to scale-up: it will mean larger capacity to transform gas and liquid hydrocarbons into a wider range of petrochemical products. Using refinery technology in petrochemicals operations will enable petrochemical operators to optimise both catalyst processing and energy savings, improving the production cycle and ROI. 

Here too, Southeast Asia have been leaders in implementing digital tools to analyse and manage data, and boost business performance. Regional operators, such as IRPC, are investing in predictive maintenance and AI solutions to “increase plant reliability and reduce maintenance cost” across their integrated petrochemical complexes. 

Making a global impact 

As the world picks up the pace towards a zero-carbon future, all sectors are coming under scrutiny. Petrochemicals companies, responsible for 3.6% of all energy-related GHG emissions, are under increasing pressure to re-evaluate their impact on the environment. 

This year, Linde became one of only two chemicals companies to be recognised in the World’s Most Ethical Companies list, across 22 countries and 47 industries. Categories for recognition included “environmental & social impact; governance; ethics & compliance; culture and leadership & reputation”. 

Part of this is demonstrated through their commitment to cleaner energy and gas business models, for example, their foray into green hydrogen. At the start the of the year, the company announced that they would build, own and operate the world’s largest PEM (Proton Exchange Membrane) electrolyser plant, a 24-megawatt production hub for green hydrogen. They are not the only ones expanding their reach into green gas. The global green hydrogen market is set to expand at 13.2% CAGR over the next few years, and by 2030, hydrogen developers predict that “it will be possible to have a large-scale positive business case in renewable hydrogen”. 

From ‘new normal’ to ‘business as usual’

Southeast Asia has long been tipped as a rising global chemical hub. International downstream leaders, such as ExxonMobil, have chosen the region as the site for their “world-scale petrochemical plant”. 

Linde’s recent appointment of Singapore-based, former APAC CEO and Southeast Asian regional Business Head, Sanjeev Lamba, to the role of global COO, shows that the region is a long-term area of focus as the gas and chemicals giant aims to “[leverage] digitalization initiatives across every aspect of our business and capitalise on opportunities for future growth”. 

The shock of the pandemic has shifted the spotlight onto both chemicals and Southeast Asia, and given them the opportunity to prove themselves as heavy hitters on the global landscape. Now, as the ‘new normal’ settles into ‘business as usual’, that streak of success is here to stay.