Skip to main content

IEEFA Europe: Proposed INEOS cracker plant would oversupply ethylene market

December 09, 2021

December 9, 2021 (IEEFA) — INEOS Group’s proposed Project ONE ethane cracker plant in Antwerp, Belgium, is a risky venture in an already well-supplied market, according to a briefing note by the Institute for Energy Economics and Financial Analysis. If approved, the project would appear to be at odds with the European Union’s aggressive long-term goals to decrease fossil fuels in plastics production and to curb single-use plastics.

IEEFA’s briefing note questions the viability of the project, and whether the INEOS Project ONE plant is needed. The briefing note identified a series of weak financial conditions facing the project. The project faces weak profit margins, decreased demand from increased recycling and a strengthening of existing plants as companies invest in upgrades.

“There is a very high likelihood that domestic demand will weaken in Europe as we enter a post-pandemic market,” said Tom Sanzillo, IEEFA’s director of financial analysis and the briefing note’s lead author. “Before the pandemic, producers faced a future of low margins and low capacity, and these trends are likely to re-emerge after it. The global plastics economy will return to a state of oversupply, and that is counterproductive for a new facility like Project ONE.”

Project ONE would curtail CO2 emissions by using wind as an electricity source. The production process would use blue and green hydrogen to further reduce emissions. Planning documents also identify an “open access” carbon capture and sequestration project as a future resource.

“The project assumes the continued availability of inexpensive fracked ethane from the United States,” said Sanzillo.

INEOS already supports some of its existing European ethylene capacity with U.S.-sourced ethane.

From a policy perspective, IEEFA’s briefing note suggests that measures enacted by the EU to curb plastics use—especially single-use plastics—and to promote recycling undermine the need for the facility.

“The EU has passed policies to aggressively decrease the use of plastic goods,” said Suzanne Mattei, an IEEFA energy policy analyst and co-author of the briefing note. “The measures are structured to lower demand over time, and they strike at the very heart of products that are not designed for re-use or cost-effective recycling.”

The cumulative impact of low GDP growth, strong competition from oversupplied international markets, weak European margins, increased recycling and implementation of circular economy mandates leaves more questions than answers to justify the need for Project ONE.

 

Full briefing note: INEOS Proposed Cracker Plant for Antwerp

 

Author Contacts

Tom Sanzillo (tsanzillo@ieefa.org) is IEEFA’s director of financial analysis.

Suzanne Mattei (smattei@ieefa.org) is an IEEFA energy policy analyst.

Media Contact

Muhamed Sulejmanagic (msulejmanagic@ieefa.org)

 

About IEEFA: The Institute for Energy Economics and Financial Analysis (IEEFA) examines issues related to energy markets, trends and policies. IEEFA’s mission is to accelerate the transition to a diverse, sustainable and profitable energy economy. 

Tom Sanzillo

Tom Sanzillo is Director of Financial Analysis for IEEFA. He has produced influential studies on the oil, gas, petrochemical and coal sectors in the U.S. and internationally, including company and credit analyses, facility development, oil and gas reserves, stock and commodity market analysis, and public and private financial structures. He also examines such areas as community and shareholder activism, institutional investment, public subsidies and Puerto Rico’s energy economics.

Go to Profile

Suzanne Mattei

Suzanne Mattei is an attorney with over 30 years of experience in public interest law and policy. She has analyzed the Federal Energy Regulatory Commission’s policies related to interstate pipeline approval. She has also conducted research on blue hydrogen, petrochemical projects, gas flaring and fossil fuel extraction on public lands.

Go to Profile

Join our newsletter

Keep up to date with all the latest from IEEFA