Sustainability
Not a buzzword
Is sustainability just a buzzword and the energy transition a mere fantasy? That is the impression Aramco CEO Amin Nasser left during his speech at CERAWeek 2024 in Houston, Texas, earlier this March. Nasser stated that the current transition strategy is “visibly failing on most fronts,” urging society to abandon the fantasy of phasing out oil and gas and instead invest in them adequately, based on realistic demand assumptions.
If there is one word that has echoed throughout every interview GBR conducted for this report, it is sustainability. However, each of the more than 60 interviewees interviewees made clear that discussing a term like sustainability should not be taken lightly. Sustainability inherently comes with a cost. Instead of questioning whether sustainability is merely a buzzword, we should ask ourselves how will we finance it?
“One of the main questions is `Who will take the bill for all of this?’ I believe that we need to shift our mindset away from focusing solely on the lowest cost to considering the best overall costs,” said Martín Toscano, president for Mexico at Evonik.
What he said next also resonated across many interviews: “While many products and technologies are in transition, and we may not yet have solutions at the competitive level of fossil-based products, adopting a strategy of push and pull —where one pushes but is supported by other stakeholders, makes it easier to demonstrate that what seems like the lowest cost is not necessarily the best final cost.”
“We provide safety and reliability through process inerting with nitrogen and enhance competitiveness with technologies such as using oxygen in catalytic cracking through FCC (Fluid Catalytic Cracking), which can increase production by 10% to 20% without significant additional investments.”
Rodrigo Jorge, General Director, Air Liquide Brazil
For Carlos De Lion Neto, Southern Cone president at Arkema, the ones pulling —or pushing— are younger generations: “New generations are pushing for sustainable, innovative and high-performing products without significantly increasing costs and harming the environment. Companies that stay tuned to these trends will be better positioned to offer solutions that meet these expectations.”
In a conversation with Mauricio Adade, president for Latin America at dsm-firmenich, he highlighted some statistics about society’s demand for sustainable solutions. According to the Retail 2024 report by Adyen, a payment technology company, 56% of Brazilian consumers are willing to pay more for a product if the seller is transparent about the measures taken to reduce environmental impact. However, the Social Panorama of Latin America and the Caribbean 2023 report by the Economic Commission for Latin America and the Caribbean (ECLAC) states that, despite improvements in some indicators, over 180 million people in the region still lack sufficient income to meet their basic needs. Among them, 70 million are unable to afford a basic food basket. Sustainability extends beyond environmental concerns; it encompasses social factors as well. Therefore, how can we expect all Latin Americans to pay a premium for more sustainable products? For Adade, companies are the ones that must find a balance: “It is also crucial to recognize that in certain countries in Latin America, where many struggle to have enough to eat, sustainability seems like a luxury. Companies like ours, with sustainability as a core, must find ways to balance these realities.”
A circular chain is only as strong as its weakest link
As negotiations for a UN plastic treaty approach their final stages, with the last session scheduled from November 25 to December 1, 2024, in Busan, Republic of Korea, much focus is on circularity. Expectations are high: “By 2050, 50% of plastics are anticipated to come from circular resources,” remarked Gabriel Rodríguez Garrido, executive director at the Argentine Petrochemical Institute.
However, the current downcycle presents challenges, particularly for mechanical recycling, as noted by Stefan Lepecki, CEO of Braskem Idesa: “If global polyethylene prices remain low due to supply and demand imbalances, producing and selling recycled PCR products becomes more difficult. Collecting waste and blending it incurs higher costs than producing virgin resin. Our challenge lies in becoming more efficient in waste collection, using technology, and improving logistics to offer PCR as an environmentally sustainable yet economically viable solution.”
Pedro Prádanos Zarzosa, Veolia Brasil’s CEO, also shed some light on the current challenges of circularity in plastics: “The key factors for success include securing a steady feedstock supply at stable prices and ensuring committed buyers for recycled materials [...] Chemical recycling is even more challenging, as the end product, like naphtha, requires high and consistent quality suitable for plastic production.”
In Argentina, Petrocuyo is exploring pyrolysis to address sustainability. CEO Javier Sato shared that the company is considering constructing its own facility or partnering with other firms to establish a chemical recycling plant. For Ariel Stolar, commercial manager at Pampa Energía, this is a good approach to tackle scale: “Making such investments can be challenging in a small market like Argentina. For example, installing a pyrolyzer in a market with limited consumption is difficult, but investing in one to handle several plastics may be more feasible,” he said.
Paulo Barbosa, South America’s director of sales for pulp & paper at Kemira, also offered some insights into cost scales. Kemira is working on a renewable barrier coating solution based on PHA (polyhydroxyalkanoates), which provides paper with plastic-like impermeability. Barbosa explained that PHA technology has a similar function as polyethylene but is made from renewable sources using bacteria and is compostable. However, cost remains a challenge: “It is true that plastic is a very cheap substrate, and for many products, packaging costs are small compared to the price. For example, at Starbucks, the cost of a cup is much less than the coffee it holds. So, switching to plastic cups might not save much money. While the cost difference is minor for some markets, it remains significant for others. As PHA technology becomes more widespread, costs are expected to decrease,” he noted.
“Natural gas plays a crucial role in the transition to decarbonization. It serves as a bridge fuel, offering a notable reduction in CO2 emissions compared to heavier fuels like oil. This transition is essential for moving towards cleaner energy sources.”
Mário Simon, Executive Business Director, White Martins - A Linde Company
Latin America is walking the talk
Colombia passed a bill in July 2024 banning single-use plastics. This recent legislative development raises questions about whether Latin America is lagging in environmental stewardship. Gustavo Cienfuegos, managing director for Latin America at Topsoe, commented that Latin America is behind the US and Europe in the energy transition, however, he suggests that this gap might be more about the pace of legislative changes rather than a lack of commitment. He advocates for a shift in approach, emphasizing that incentivizing rather than prohibiting could be a more effective strategy: “The renewables market is heavily influenced by government support. With the Inflation Reduction Act (IRA), the US is a great example, leading to a boom in projects, including many for Topsoe involving ammonia and electrolyzers. The lack of similar incentives in Latin America makes it harder for local companies to justify projects of this magnitude,” illustrated Cienfuegos.
Cienfuegos also noted that while each Latin American country has its unique socioeconomic situation and priorities that can sometimes push environmental projects lower on the national agenda, there are many sustainable projects underway, especially SAF projects or green ammonia production, like the project Topsoe is working on in northern Brazil: “There are many initiatives, mainly leveraging the availability of resources like biomass, wind and solar energy. Brazil, for instance, is one of LATAM’s primary drivers for these types of projects, benefitting from extensive natural resources and ports with easy access to Europe,” he concluded.
In the context of limited government incentives, Brazil launched a program in early 2024 that places innovation and sustainability at the forefront. Ivan Fortunato, commercial director for LATAM at Yara, noted that Brazil’s status as an agricultural powerhouse will facilitate the ramp-up of biomethane production. This effort is supported by the federal government’s Nova Indústria Brasil Program to revitalize the chemical industry with a planned investment of R$300 billion by 2026. “The program is a crucial step serving as a foundation for developing new markets, especially in renewable industries [...] Brazil is rich in renewable resources and already has a relatively green chemical industry. With the proper regulations and a well-structured gas market, these strengths can be exploited to advance the country’s industrial landscape,” said Fortunato.
Mário Simon, executive business director at White Martins, a Linde company, highlighted how Brazil’s unique ecosystem and geography, combined with the recent approval of a new hydrogen policy (pending President Lula’s final sanction) position the northeastern region of Brazil as a key hub for renewable energy projects: “We have many projects and a Memorandum of Understanding that focuses on green hydrogen and ammonia production in the northeastern region of Brazil, which has favorable conditions for wind and solar energy production. Additionally, the region’s proximity to Europe and the US, coupled with state incentives and a free trade zone, makes it of strategic importance for these types of projects.”
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