Period as a semi-retired pensioner: 247 days
This week my Ruminank Pink Friday ™ submission is a day early because we are packing our buckets, spades, dogs, golf clubs, and the kitchen sink for our annual Christmas holiday at our house in Southbroom. Friday the 10th of December is the day that we are driving. For those who don’t know Southbroom is a small village on the KwaZulu Natal (KZN) south coast which borders the wild coast.
Over the past week or so an enormous civil protest has emerged regarding exploration for oil and gas that the global multinational Shell is now performing, using a seismic survey, in the ocean off the wild coast. In the interests of full disclosure, I confess to having just retired from a 30-year career working for a petrochemical company. I am now however retired, and I am not being paid by the industry.
There are many articles some more shrill than others, but I have picked this one because it better summarises some of the themes of the many articles written on this topic. https://www.dailymaverick.co.za/opinionista/2021-12-06-shell-boycott-can-be-a-turning-point-to-reckon-with-unholy-alliance-between-fossil-fuel-corporations-and-governments-destroying-our-future/.
It is suggested that no further oil and gas exploration be allowed globally to drive the transition to net-zero. In South Africa’s case, we can get all the oil and gas we need from the Middle East and pay them and forego any revenue and jobs that oil and gas discoveries in South Africa might bring. After all, we are a wealthy country with full employment.
During the last week, I read a very well-written article by one of the top energy experts in the world, Daniel Yergin. https://en.wikipedia.org/wiki/Daniel_Yergin. His latest article, which is well worth reading, was published in the Atlantic, https://www.theatlantic.com/international/archive/2021/11/energy-shock-transition/620813/.
“Innovex Downhole Solutions, a Texas-based company that provides technical services to the oil and gas industry, ordered 400 jackets from North Face with its corporate logo. But the iconic outdoor-clothing company refused to fulfill the order. North Face describes itself as a “politically aware” brand that will not share its logo with companies that are in “tobacco, sex (including gentlemen’s clubs) and pornography.””
I guess I am now lumped with pornographers. It is now perhaps too late but perhaps I should have considered a career in pornography. I’m not sure if the HR departments in pornography companies are as large as in petrochemical companies. Are there opportunities for the retired in pornography? Do I have what it takes?
Perhaps combining the oil and gas industry with pornography is appropriate? Is pornography available? Are the boycotts working? How hard is it to access pornography? Perhaps a new service industry will arise where a service provider will discreetly take your car, change the number plates, and fill your car up in a secret location. Perhaps filling stations will be relocated to walled industrial areas, next to gentleman’s clubs, where genteel people can’t see them. This can provide employment to poorer people. No self-respecting climate activist wants to be caught with their pants down at a service station filling up their SUV.
“At least 90 percent of the materials in North Face’s jackets are made from petrochemicals derived from oil and natural gas. To muddy matters further, not long before North Face rejected the request, its corporate owner had built a new hangar at a Denver airport for its corporate jets, all of which run on jet fuel. To spotlight the obvious contradiction, the Colorado Oil and Gas Association presented its first-ever Customer Appreciation Award to North Face for being “an extraordinary oil and gas customer.” That’s the award North Face spurned.”
We are all aware of the petrol and diesel price but is this potentially just the beginning? If we choke off investment in the oil and gas industry, could we see triple-digit oil prices? Petrol prices recently passed R20/litre ($4.66/gallon) for the first time. Could we see R30-40/litre? Is this perhaps not a good thing because it will force down demand? I would also just remind you that the price of many other things including food would increase in tandem. This is not just because of rising transport costs but because of rising chemical prices. The $3.9 trillion pa base chemical industry relies on the oil and gas industry for its feed. This includes fertilisers for food production as well as polymers and a myriad of other chemicals such as detergents, pharmaceuticals, cosmetics, and others. If you were to do a proper audit of your, lifestyle, home, car, wardrobe, and possessions for their petrochemical content it will be a very sobering exercise even for a bearded, minimalist, vegan, Birkenstock wearing environmental activist.
“It’s not just a matter of shifting from petrol-powered cars to electric ones, which themselves, by the way, are about 20 percent plastic. It’s about shifting away from all the other ways we use plastics and other oil and gas derivatives. Plastics are used in wind towers and solar panels, and oil is necessary to lubricate wind turbines. The casing of your cell phone is plastic, and the frames of your glasses likely are too, as well as many of the tools in a hospital operating room. The airframes of the Boeing 787, Airbus A350, and F-35 Joint Strike Fighter jet are all made from high-strength, petroleum-derived carbon fibre. The number of passenger planes is expected to double in the next two decades. They are also unlikely to fly on batteries.”
The activists cite reports showing that the transition to net-zero can be done such as the one done by the International Energy Agency (IEA). https://www.iea.org/reports/net-zero-by-2050. The cost and economics of this transition are not well explored. There are several start-ups that promise e-fuels that are carbon neutral made from renewable electricity and direct air capture. I reference just one here. https://www.ecowatch.com/renewable-energy-from-air-co2-2655915204.html#toggle-gdpr. What the articles do not say is how much this will cost. Hydrocarbon fuel produced in this way will be extremely expensive. But that’s ok because the poor and middle class can stay at home. The properly rich on the other hand? Well, they are different.
Allow me to go down just one rabbit hole to illustrate the point. The world’s most common polymer is polyethylene which is cheap and ubiquitous. It has many applications including packaging including food packaging, houseware, piping, fibres, and textiles amongst many others. You use a lot of it whether you are aware of this or not.
Polyethylene is made from ethylene. Ethylene is one of the 6 commodity petrochemical building blocks. For those of you nerdy enough to go further down the rabbit hole you can start here: https://en.wikipedia.org/wiki/Petrochemical. Almost all the world’s ethylene is made using steam crackers. Steam crackers piggyback on the global oil and gas industry for their feedstock. A significant proportion of global ethylene supply is made using the simplest and cheapest steam cracker configuration which is an ethane cracker. Ethane is a minor by-product of natural gas production. A “wet” natural gas reserve may typically contain about 5% ethane. This gets purified from the natural gas and is used as a feed to an ethane cracker.
As with many commodity chemical plants, ethane crackers get more cost-effective the bigger they are which is known as economy of scale. There has been a decades-long trend to ever bigger ethane crackers being built. The current state of the art would require about 2 million tons per annum (tpa) of ethane to build a world-scale cracker with a price tag in the billions of dollars. Bearing in mind that a typical wet gas contains 5% ethane you can see that you would need to process about 40 million tpa of natural gas to get the required ethane. Just in case you don’t know 40 million tpa of natural gas is a lot. So much so that there are only a few locations in the world where there is sufficient natural gas. The locations include the Middle East, North America, and the Soviet bloc.
If we assume that natural gas use is going to now start a decades-long decline on the path to net-zero, then the supply of ethane will inevitably decline, and its price will presumably rise. Irrespective of its price the required supply simply will not exist and ethane crackers will slowly be starved of feed.
There has been a flurry of research activities into making “biopolymers”, but progress has been slow, and it is very difficult to match the properties and cost-effectiveness of polyethylene. One can make ethylene from bioethanol produced from maize or sugar cane and this is done on a relatively small scale in Brazil. The South African Department of Trade and Industry (DTIC) has stars in its eyes regarding this possibility for South Africa. This will however be a niche approach globally and will not be able to replace all the ethylene produced using steam crackers.
Just as one can make renewable hydrocarbon fuels from renewable electricity and carbon sourced from direct air capture (DAC) one could in theory replace the entire current global petrochemical infrastructure with new green infrastructure using routes like methanol to olefins MTO). This will however be an enormously (ruinously?) capital intensive exercise and would involve chemical prices which would be many multiples of current prices.
As fossil fuel use declines and the global petrochemical industry is starved of feed the path to renewable chemicals will not be a simple one and will not be without economic disruption, sacrifices, and potentially steep price increases.
Thank you very much for your comments and suggestions and please keep them coming.
Regards
Bruce
Ruminant Pink Friday 
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