European Refining 2050

Stephen George discusses how to turn the vision into reality

Europe’s refiners, through their industry organisation Fuels Europe, have set out their long-term ambitions in a new program called Vision 2050. The outlook sees Europe’s refiners staking a claim to remain at the centre of transport fuels supply, the petrochemicals industry, renewable fuels and energy – even as Europe’s Energy Union strategy mobilises a low-carbon, sustainable energy transition.

While Europe doesn’t speak for the rest of the world, its aspirations for greenhouse gas reduction, technology leadership and renewables focus will help to define the global direction of travel in the decades ahead. Just as European standards for higher fuel quality have spread throughout much of the world, Europe’s future embrace of green technologies and sustainable practices will drive energy efficiency and emissions reduction to help the world achieve its commitments under the 2015 Paris climate change agreement (COP21).

Vision 2050 starts with the premise that Europe and the world will continue to rely upon liquid transport fuels for the foreseeable future – they are the most energy-dense, cost-effective and in some cases (e.g. aviation) the only practical way to maintain affordable mobility. Electric and hybrid cars – alternatively fuelled vehicles (AFVs) – will play a role in private transport, but they cannot meet the needs of the entire transport sector, much of which will continue to rely upon liquid fuels.

What does this mean for the refining industry?
This longer-term dependence on refined products is not a radical view. The International Energy Agency’s (IEA) 2017 World Energy Outlook ‘current policy scenario’ also anticipates a world where oil demand continues to grow for at least another two decades, as population growth and economic development outpace efficiency gains, the uptake of AFVs and other new technology.

If Europe isn’t ready to part with fossil fuels, Vision 2050 suggests that these fuels can be made greener by introducing more renewable material into the mix, and by using renewable energy to produce and distribute them. By lowering the fossil-fuel density of these fuels, they argue, a broader and more immediate impact on CO2 emissions can be realised than by waiting while new AFV technology matures and propagates around the world, which will take decades.

The vision also calls for the EU to maintain
technological leadership in this area, developing and commercialising new processes and technologies. New process technologies and digitalisation will develop and sustain new highly skilled jobs in many sectors across the EU. Vision 2050 asks for a technology-neutral playing field, letting economics separate winners and losers so long as results are achieved, and it calls on European politicians to deliver a long-term stable investment climate to give investors the confidence they need to make the big-ticket investments that will be needed to deliver this vision.

New technologies will shape the future
Europe’s refiners are quick to agree that there are no ‘silver bullet’ technologies that will deliver all of the benefits in one package. It’s not that simple. Rather, a broad framework of technologies in the refinery setting will be managed at an asset-specific level to deliver significant greenhouse gas reductions. New technologies such as green hydrogen, which incorporates renewable hydrogen into conventional transport fuels, are useful in upgrading technologies to continue the trend away from heavy fuel oil use and to remove more pollutant sulphur from the fuel mix. In addition, renewable refinery fuel could see refiners using more renewable electricity and biogas instead of fossil hydrocarbons to power refining processes. The refinery of 2050 could be fuelled solely by renewable energy.

A role also remains for increasing biofuels in the transport fuel mix. As technology continues to evolve, sustainability, land use challenges and the food-vs-fuel debate will be resolved. Drop-in versions of nextgeneration biofuels from waste, agricultural by-products and algae sources will become more commonplace. Petrochemicals will also be transformed by renewable feedstocks, plastic recycling technology, and a broader embrace of the circular economy.

Developments in new engine technology will also drive demand for higher quality transport fuels that could in turn reduce overall fuel demand by further improving fuel economy. Technology improvements in cars and in traffic management are also expected to improve the efficiency of vehicle use, delivering more personal mobility with lower greenhouse gas emissions.

Digitalisation will also drive continued efficiencies in energy optimisation, workforce upskilling and plant reliability. Some of these technologies are in their infancy today but will start delivering real benefits through improvements in predictive maintenance, reduced downtime, operating cost reduction, stable operations and on-spec products, achieving maximum economic value from capital investment. The skills base needed in the refinery of 2050 will be considerably broader than it is today.

Alongside evolving AFV use and the development of other renewable energy, these new technologies are expected to lower Europe’s share of global carbon emissions from around ten per cent today to nearer six per cent by 2050, with a long-term aspiration of completely decarbonising Europe’s energy needs. As this transition is happening, it can also position European companies as global leaders in low carbon technology that can be exported to the rest of the world as it catches up with Europe.

Preparing for the future
Vision 2050 is a roadmap for a viable future for Europe’s refineries, but it is not a simple way forward. The vision is ambitious, as Fuels Europe is quick to acknowledge. Yet it is vital to Europe’s energy independence, the environment and the economy. Delivered successfully, these will become a benchmark for refiners in many other markets. It can be difficult, looking at your organisation, to know if you are ready for these challenges.

Refiners should be well positioned to manage the complex and expensive challenges required by the energy transition. If the EU comes to the table and fosters the investment and regulatory climate needed to stay the course, Europe’s refiners will need to rise to that challenge and deliver the vision. This will require strategic insight, capital investment, technological evolution, organisational maturity, and Operational Excellence.

Turning Vision 2050 into reality
To do this, refiners need to invest in robust technology solutions. Adopting an Operational Excellence framework integrates strategy, business processes, people and technology to address business, asset, organisation and applied technology challenges. Operational Excellence solutions are focused on delivering continuous improvement and sustainable competitive advantage through a program of discovering, delivering and sustaining operational benefits in all key areas of management control.

Conducting a pre-investment analysis of new technology to ensure the new investment choices are robust and resilient will help manage the risks from adopting new technology. It may also identify if there are any synergies that can be realised with existing technologies. It is worth considering simulation software to simulate the impact of adopting new technologies and unconventional feedstocks both on refinery yield and financial performance.

Refiners must also ensure that they are digitalisationready. To do so, refiners should not just look at the new technologies they are putting in place but also their employees and their capability to cope with these new developments. The application of new digital technologies will change the way the organisation is managed, from remote control centres to operations, maintenance and contractor management. It is important to help guide the transition by delivering change management targeted at frontline employees to ensure they retain the right capabilities and develop the necessary future skills.

Translating Vision 2050 into practice will require Europe’s refiners to rethink and rebuild their long-term strategies, along the way transforming their organisations into modern, flexible knowledge-based enterprises.

KBC – A Yokogawa Company
Stephen George is Chief Economist – EMEA and APAC, KBC – A Yokogawa Company. KBC addresses challenges across upstream, midstream and downstream oil and gas, chemicals and power. Located in 22 principal offices around the world, KBC understands the unique situation of your business and can tailor advice and solutions that consider your specific market conditions, regulations, resource constraints and practices.
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