the future of bio-based chemicals depends on feedstocks
TRANSCRIPT
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Today's Presenters
Dr. Michael Mbogoro,
Consulting analyst
Frost & Sullivan
Dr. Brian Balmer,
Industry Principal
Frost & Sullivan
• Chemicals & Materials
• Company expert on shale gas and
alternative feedstocks
• Recent experience researching lignin as
an alternative feedstock
• 13 years' research experience at Frost
& Sullivan
• Company expert on renewable
feedstocks
• Contributor to the company's Mega
Trends vision
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Our Chemicals Market ApproachFocus on end-markets and mega trends
Functionality and
performance
Health and
wellness
Globalisation Low carbon economy
Construction
& Utilities
Food Drugs &
Cosmetics
Transportation
Source: Frost & Sullivan analysis
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A complex universe of factors influences demand for bio-based
chemicals
Bio-based
chemicals
Globalisation
F & P
H & W
Renewable
feedstock
Low
carbon
1st
Gen
AlgaeLignin
Four megatrends are the primary
drivers of change in the chemical industry.
All four are relevant to the growth in interest in bio-based chemicals.
Several factors can make a product "low-carbon" or sustainable, only
one of which is to use a bio-based feedstock.
In order to understand the scale of the opportunity, it is critical to understand the potential demand from end-users in each vertical market.
The source of feedstock is
an important consideration when planning the production of a bio-based chemical.
Downstream
sustainability
Source: Frost & Sullivan analysis
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Mega trendsInfluence on bio-based chemicals
Whilst the move to a low carbon economy remains the most important driver, demand drivers come
from all mega trends
Low Carbon Economy
50.1%
Functionality & Performance
31.8%
Health & Wellness
13.6%
Globalisation 4.5%
Bio-based Chemicals Market: Impact of Mega Trends (Global), 2013
Statistics show the results of a poll question asked during a live Analyst Briefing: "Which Mega trend is most driving use of bio-based chemicals?"
Source: Frost & Sullivan analysis
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What is Sustainability?
USE
Chemicals enabling
greater sustainability
in downstream end-
markets
Renewable
Recycled Recyclable
Biodegradable
46.4%
7.1%
3.6%
3.6%
39.3%
Statistics show the results of a poll question asked during a live Analyst Briefing: "Which aspect of Sustainability is most important for you and your business?"
Source: Frost & Sullivan analysis
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What is Renewability?Many different types of product make use of renewable feedstocks
Natural product
Natural extract /
derivative
Biomass
Bio
tech.
Chemical
transformation
FDC Construction &
Utilities
Transportation
Olive oil Wood Natural rubber
Cellulose ethers &
lignosulphonates
Biofungicides
Natural
fragrance
ingredients
Surfactants from
natural oilsPA 11
BioisopreneBio-based polyols
for PU insulation
Natural paint
binder resins
Car care
chemicals e.g.
carnauba wax &
limonene
Source: Frost & Sullivan analysis
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End UsersConnecting feedstock to end-user along the value chain
Feedstocks
Building blocks
Speciality chemicals
& materials
End-markets
Crops
14.3%
Other routes e.g. having crops produce target
chemicals directly
35.7%
28.6%
14.3%
7.1%
Statistics show the results of a poll question asked during a live Analyst Briefing: "Which step in the bio-based value chain do you think needs most optimization?"
Flexibility
Versatility
Source: Frost & Sullivan analysis
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FeedstocksHow do they compare?
Traditional oil & gas
Shale gas
Captured flare gas
Recyclate use
First generation bio-based
Plant cellulose
Plant lignin
Algae
Captured CO2
Level o
f In
no
vati
on
Sustainability Performance
Chemicals & Materials: Comparison of Feedstocks, Global, 2012
Source: Frost & Sullivan analysis
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Shale Gas
Supply
Demand
Competition from other
uses
Competition from other
feedstocks
Currently, global supply is largely limited to the
US where production technology is more mature.
Shale gas accounts for 32% of total natural gas
resources globally.
As technologies improve at the production
and processing (gas-to-liquids)
stages, shale gas is bound to penetrate
the chemical feedstocks market further at
the expense of crude oil.
As an abundant resource with a well
established value chain, shale gas has
the advantage when compared to many
bio-based alternatives.
Mainly from energy and transportation fuel.
90% of natural gas is currently used for heat
and power generation. In regions where gas is
cheap, such as North America, there is little
incentive to switch to alternative supplies.
Source: Frost & Sullivan analysis
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Cellulose Market Dynamics
Supply
Demand
Competition from other
uses
Competition from other
feedstocks
Global availability of cellulose exceeds any
potential demand from the chemical industry.
However, most is contained in lignocellulosic
materials.
Economics will be the primary determiners
of demand for cellulose as a feedstock for
chemical companies
The majority of uses being considered
for cellulose are as a second generation
feedstock in place of first generation
starches.
Cellulose derivatives are already commonly
used by chemical companies.
Supply of cellulose is sufficient for competition
between uses to be of minimal concern.
Source: Frost & Sullivan analysis
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Lignin Market Dynamics
Supply
Demand
Competition from other
uses
Competition from other
feedstocks
Potential supply exceeds current demand. Actual
supply could also increase thanks to new
separation technologies.
Current demand for lignin is mainly limited
to low value applications for
lignosulphonates.
Lignin as an alternative to aromatic
chemicals could become more important if
petrochemicals come more and more from
natural gas instead of crude oil, since
natural gas contains no BTX component.
Since lignin forms a very useful fuel for
paper mills, there is comparatively little
pressure to find alternative uses for it.
Source: Frost & Sullivan analysis
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Algae Market Dynamics
Supply
Demand
Competition from other
uses
Competition from other
feedstocks
Total global production of algae derivatives is, at
present, very limited. This creates a large mis-
match with potential demand.
Algae represents the feedstock that potential
users within the chemical industry are most
interested in.
However, commercialisation is very
dependent on process scale-ups, for which
large uncertainties remain.
Algae represents a potential route to the
same building blocks available from other
sources, including natural oils and sugars
Chemicals risk being caught in the middle
between two very different scales of development
in algae:
• Very high volume biofuel development based
on "green crude" from algae
• Very low volume development of essential
oils, especially fish oils, for food
applications, and extracts for cosmetics
applicationsSource: Frost & Sullivan analysis
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Carbon Dioxide Market Dynamics
Supply
Demand
Competition from other
uses
Competition from other
feedstocks
The volumes of CO2 that will potentially be
available from carbon sequestration investments
will far outweigh any potential demand for use as
a chemical feedstock.
CO2 is the least versatile of the feedstocks
considered here, but still has the potential for
some interesting niche applications.
The most likely markets for CO2 as a
chemical feedstock make use of its unique
chemistry, and therefore competition will be
mainly from existing end-products in target
markets.
CO2 supply is an essential component of the
algae industry and, for that reason, algae facilities
will tend to be sited near a source of CO2.
Source: Frost & Sullivan analysis
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ConclusionsSome feedstocks are in need of better supply; others would benefit more from application
development
Algae
LigninCellulose
CO2
Potential
Demand
Potential Supply
Sustainable Feedstocks Market: Summary of Supply versus
Demand Scenarios, World, 2013
Supply may not be able to meet
demand.
Strategy should be to find more
sources of supply.
Supply exceeds demand.
Strategy should be to find more
uses to stimulate demand.
Source: Frost & Sullivan analysis
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For Additional Information
Brian Balmer
Industry Principal
Performance Materials
(44) 1865 398634
Leonidas Dokos
European Research Director
Chemicals & Materials
(44) 1865 398685
Mark Hicks
Sales Manager, North America
Chemicals & Materials
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Chiara Carella
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