Downstream Calls for Decarbonization Clarity

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The global downstream industry needs more direction from regulators and governments if it is to speed up its own decarbonization process, several experts said at the Energy Intelligence Forum 2021 on Wednesday.

“We need a clear vision from our regulators and policymakers because we don’t know the value of some of the products and projects … and that depends on regulation,” said Berta Cabello, head of refining transformation at Repsol.

The downstream needs to account not only for emissions from its own operations but from the end-use of its products — known as Scope 3 emissions — and that not only complicates the mathematics of transition but at times demands entirely different formulae.

Refiners and petrochemical producers are shooting in the dark, to a degree, with the most efficient paths toward decarbonization dependent not only on end-use markets but also on government incentives.

Khaled Salmeen, Abu Dhabi National Oil Co.'s (Adnoc) executive director of downstream, marketing and trading, added that the transition to lower-carbon energy sources is happening at different rates in multiple regions — quite quickly in Europe, for example, but more slowly in Asia-Pacific, where demand continues to grow.

That puts the transition agendas of India and China in focus.

Low-Hanging Fruit

Biofuels are proving themselves a shortcut for decarbonization in the transportation sector, Cabello said. A slew of conversions of existing refining capacity to produce renewable diesel in both Europe and North America speaks to biofuels’ role in the transition.

However, investment in sustainable aviation fuel (SAF) continues to lag. And while production of renewable diesel is growing almost exponentially, the volumes remain tiny relative to global petroleum diesel demand.

Improvements to existing infrastructure can also help reduce downstream emissions, said Olli Nissinen, head of Middle East business development for Siemens.

“Within next five years, I would say waste heat recovery” — returning heat from the refining process back to units rather than allowing it to diffuse — is a key strategy to cut carbon footprints, Nissinen said.

He added that for the petrochemical sector, equipment upgrades can eat into emissions as well.

Electric vehicles are likely to make significant inroads in the transportation sector, panelists noted, but Salmeen warned that since coal is still a significant source of electricity generation, electrification is not always the answer.

Blue First

Hydrogen presents more of a medium- and long-term strategy, Forum delegates said, especially so-called “green hydrogen,” which is extracted from water by electrolysis.

Blue hydrogen derived from the natural gas stream is more quickly applicable, they said.

The transition will start from blue and go to green, Adnoc’s Salmeen said. But even for blue hydrogen, significant hurdles remain, many of which are tied to a lack of market and regulatory clarity.

“We do not know how the market will value [different types of hydrogen]. It is going to take a few cycles of evolution to get there unless a policy comes and totally changes the timeline,” he said.

In addition, hydrogen cannot be shipped, so its midstream infrastructure will be limited to contiguous areas served by pipelines.

ENERGY INTELLIGENCE FORUM 2021, Biofuels (incl. SAF), Refining, Corporate Strategy , Low-Carbon Policy, CO2 Emissions, Hydrogen
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