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Shell Chemical Bargaining

Snapshot of government funding#

Federal Government#

  • NRC research dedicated to CCS supporting competitiveness with biochemical production.

  • NRCan states that chemicals production is cheaper in Canada than Germany.

  • Natural gas price support to support low feedstock price.

  • "Supportive policy framework for producing Blue Hydrogen" and other products using carbon capture.

  • NRCan states that government subsidies control the cost of Blue Hydrogen and other products using CCS in Canada.

National Research Council research into CCS#

  • Energy, Mining and Environment Research Centre

  • Mining Materials Wear and Corrosion Consortium (MMWCC)

  • Supply chain innovation

  • Shell has stated that it save "Multi-million dollars per year". This was estimated at the time $120M per year for MMWCC research.

  • Shell sold the MMWCC-aligned unit to CNRL in 2019, likely with these savings supporting the sale price.

Technology Innovation Emission Reduction (TIER)#

  • Funding from the Alberta government.

  • Funding supporting the Alberta Carbon Capture Incentive Program (ACCIP)

  • Leverages federal CCUS Investment Tax Credit

  • 12% of new capital costs for hard to abate industries including petrochemical.

  • Expected to provide between $3.2 to $5.3 Billion to sector now until 2035.

  • Shells Quest project worth $1.3B got $865M from government grants/supports. Quest allows the reduction of carbon footprint of Shells Ethylene and Styrene production.

Canadian Industry Partnership for Energy Conservation (CIPEC)#

  • Green Industrial Facilities and Manufacturing Program

Sector-Specific Industrial Energy Efficiency (SIEE) Grant Program#

The purpose of the Sector-Specific Industrial Energy Efficiency (SIEE) Program is to enable Alberta’s pulp and paper, chemical, fertilizer, minerals, and metals sector operators to reduce greenhouse gas (GHG) emissions intensity and increase sector competitiveness.

Alberta Compliance Cost Containment Program#

  • Little cost burden of complying with increased regulation in Canada.

Alberta Petrochemical Incentive Program#

  • Inter Pipeline receives money to do similar investment as Shell.

Shell in Alberta#

Shell in Alberta#

  • Shells operation in Alberta have had fewer issues than in the USA where operations issues and fires have increased costs there.

  • Low-carbon Chemical production in Canada because of CCS was possible because of large subsidies to Shell from Alberta and the federal government.

Shells projects are mostly integrated and allow Shell to claim lower carbon emissions for its fossil fuel derived chemical and plastics divisions.

Athabasca Oil Sands Project (AOSP)#

  • Shell Albian Sands mining and extraction operations, north of Fort McMurray, Alberta and the Scotford Upgrader.

  • Shell: now a minority shareholder of AOSP joint venture (10%).

Shell Upgrader Scotford Complex#

Operational:

  • Since 2003

  • Expanded in 2011: 300,000bpd of crude.

Uses hydrogen-addition technology to upgrade bitumen into synthetic crude oil, which is further processed in the nearby refinery.

Shell Refinery#

Project Type: Refinery Location: Fort Saskatchewan, Edmonton, Alberta, Canada

  • Refinery Capacity: 100,000bpd

Shell Chemical#

Uses lower energy intensity and CCS offset inputs from the refinery to produce chemical precursors for plastics.

From Shells website

  • Chemicals sales volumes were 8% lower than in 2022, mainly because of lower demand driven by oversupply and a weak economic outlook.

  • Refining & Trading sales volumes were 8% lower than in 2022 due to lower Trading sales volumes in the USA and Asia.

Shell Chemical Production 2023:

Product Scotford Shell Global
Styrene monomer 475,000t 2,354,000t
Ethylene glycol 462,000t 3,004,000t
  • Plus: Aromatics, Lower olefins, Intermediates

Shell Carbon Capture: Quest#

Shell Carbon Capture: Quest#

  • Operational since 2015

  • Adjacent to Shell’s refinery and chemicals plant.

  • Captures 1Mt of CO2/year from Scotford bitumen upgrader.

  • 65km-long CO2 pipeline to storage in a sandstone rock reservoir 2km deep beneath the ground.

Atlas Carbon Storage Hub (previously Polaris CCS)#

Atlas Carbon Storage Hub (previously Polaris CCS)#

  • 800,000 tonnes of CO 2 per year captured by the Polaris carbon capture project from the Shell Scotford Refinery and Chemicals plant near Fort Saskatchewan.

Compare to current Quest CCS facility which captured and stored more than 6Mt of CO2 from the Scotford bitumen upgrader as of July 2021.

Hydrogen #

  • Not in operation yet.

Shell signed a memorandum of understanding (MoU) with Mitsubishi Corporation in September 2021 to construct a low-carbon hydrogen facility near the refinery complex, which will utilise the Polaris/Atlas CCS project for CO2 storage.

  • Type: Natural Gas derived Hydrogen (Grey Hydrogen)

  • Location: Scotford

  • Operator: Mitsubishi Corporation

Hydrogen Products:#

  • Natural gas feedstock and steam methane reforming technology to produce hydrogen.

  • 165,000t hydrogen per year in phase one

  • Converted into grey ammonia for export to the Japanese market.

  • CO2 Captured in Quest/Polaris

Shells global production#

  • Capacity: 8.1 million tonnes of ethylene a year

  • Expansion on sustainable chemicals made from bio-based and circular feedstocks, more intermediates and performance chemicals such as polyethylene and polycarbonate.

  • Transforming our refineries into energy and chemicals parks

Shells global production#

  • Production 2022:

  • 12 million tonnes of petrochemicals

  • 1,000 industrial customers worldwide.

  • End products: medical equipment, construction, transport, electronics, agriculture and sports.

As global demand for chemicals increases, we plan to increase the size of our business, by understanding and responding to our customers’ needs.

Competing company investments and subsidy#

Dow Chemical CCS#

  • Fort Saskatchewan

  • 3.2M metrico tonnes of polyethylene and ethylene derivatives

  • Received $32M grant over three years from APIP.

Alberta Alberta’s chemicals sector, comprised predominantly of petrochemicals, was valued at $15.9 billion and employed about 35,605 people directly and indirectly in 2021.

According to the Alberta government, the industry could attract $30 billion in total investments between 2020 and 2030.

Canada has cost-competitive natural gas and a cost advantage for ethane, a key feedstock for ethylene production.

  • GPMC Collective Agreement: Fort Saskatchewan General Presidents’ Maintenance Committee for Canada Project Agreement (Dow and Shell).

Product market projections Ethylene#

Emergen Research#

EMR outline:

  • The market is projected to grow at a CAGR of 4.7% between 2024 and 2032.

  • The market is estimated to witness healthy growth in the forecast period of 2024-2032 to reach a value of around USD 72.82 billion by 2032.

  • In 2023, the market reached an approximate value of USD 48.21 billion.

The growing emphasis on sustainability and the rising shift in interest towards bio-based ethylene glycol are expected to propel the market expansion in the coming years.

The market is driven by the increasing demand for PET resins and rising applications of the product in the automobile sector.

Future Market Research Inc.#

  • 2018 to 2022 CAGR was 4.7%.

  • 2023 to 2033 CAGR of 5.3%

  • 2023 Global ethylene glycol market valuation: $17.76 billion

  • 2033 Global value estimate: $29.77 billion.

  • North America accounts for a market share of 19.3% of the global ethylene glycol business.

  • Bio-based feedstock future competitor to unmitigated fossil fuel ethylene glycol production.

  • Shells Norco Site already utilizes bio-based feedstocks for alcohol production.

Styrene#

Styrene#

  • Global Styrene market: 37 million tonnes in 2022

  • Global Styrene market: expected 58 million tonnes by 2030.

  • CAGR of 5.68% until 2030.

Styrene in automotive sector for manufacturing components will most likely further drive the Styrene market in coming years.

Shells Earnings#

Earnings Global

Chemicals and Products sales

Chemicals manufacturing plant utilization

2021 2022 2023
% 79% 68%

Chemicals and Refining availability was also below target as a result of challenges at Shell Polymers Monaca (USA) as well as the recovery after a fire in Deer Park (USA) earlier in the year.

Production Volumes#

  • Chemicals sales volumes: 8% lower in 2023 than in 2022

  • Lower demand driven by oversupply and a weak economic outlook.

  • Refining & Trading sales volumes: 8% lower in 2023 than in 2022

  • Lower Trading sales volumes in the USA and Asia.

  • Repurposing refineries into energy and chemicals parks to produce lower carbon chemicals.

Shells 2024 salaries#

Shell Executive salary#

Wael Sawan:#

  • CEO of Shell
  • Since January, 2023.
  • 2024 salary increase: 3.9%
  • Salary: £1,455,000
  • Bonus: 125% of salary

Sinead Gorman:#

  • Chief Financial Officer
  • Since April 1, 2022 (been with the company since 1999)
  • 2024 salary increase: 3.9%
  • Salary: £961,000
  • Bonus: 125% of salary

Shell workforce salary increases 2024#

  • UK: 4.5%
  • USA: 3.1%
  • Netherlands: 4.3%

Additional notes#

Styrene Monomer#

Styrene monomer is sold to customers in North America for the manufacturing of a variety of commercial and consumer products such as food containers, home insulation, safety helmets and car interiors.

The main ingredient to make Styrene is benzene.

Benzene is not a newly discovered carcinogen, however, the new recommendations on benzene exposure are much below even the current reduction of those that have been brought in for Ontario workplaces:

OHS Online report on Benzne

The original OSHA PEL of 10 ppm was based on the association of benzene exposure with aplastic anemia and the risk of cancers. The eight-hour time-weighted average (TWA) OSHA PEL and 15-minute STEL for general industry are 1 ppm [3.19 mg/m3] and 5 ppm [15.95 mg/m3], respectively (29 CFR 1910.1028). These OELs also apply to the construction and maritime industry.

ACGIH TLV Chemical Substances Committee recommended that benzene be considered an A1 carcinogen and lowered the TLV during an eight-hour TWA to 0.5 ppm [1.6 mg/m3] and a STEL of 2.5 ppm [~8 mg/m3]. NIOSH recommended exposure level for the 8-hour TWA is 0.1 ppm [0.32 mg/m3] and the STEL is 1 ppm [3.19 mg/m3].

In 2022, ACGIH published a Notice of Intended Change to modify the TLV to 0.02 ppm for an eight-hour TWA and 0.1 ppm for a 15-minute STEL.

The new Ontario regulation is late to be applied, but it is

  • 0.5ppm for time weighted average limit

The ILO/WHO occupational exposure limit is: - 0.5ppm for time weighted average limit

  • USA EPA exposure regulation.

  • 0.5ppm (1.6mg/m3)

Current Stabilized Styrene monomer has a USA exposure regulation at:

  • TVA-TWA: 10ppm

This will likely begin to align with benzene.

Ethylene Glycol#

Ethylene glycol is primarily sold to customers in North America for use in making products such as plastic drinking bottles and antifreeze.

CCS process#

  • Shells CCS explainer does not include new technology.

  • SGP is $30M/y lower operating expenditure

  • New CCS/hydrogen/ethylene technology needs to scale, but is significantly more efficient.

  • Shell is not an investor in this technology with NRC.