What’s a Relevant Pathway for Asian Refiners?
Asian refiners may be bemused or even amused watching the board-level shenanigans that have overtaken a few of the American and European giants. Case in point: the summer shareholder revolt at Exxon which put climate-savvy investors on the board. Over there, the future has already arrived today; Over here, it is coming – and soon. While these may seem like distant background noise unlikely to affect Asia, the implications will be felt from Latin America to Africa to Asia. As the Big Five go, so too must everyone else – eventually.
Asian refiners will increasingly come under pressure by investors and even national governments to share their roadmap for the decarbonisation of their operations. If your refinery doesn’t have a plan, just an aspiration to one day have a plan, you may be caught out. Now, results are expected in a matter of years – not decades. And with decarbonisation taking time and much deliberation to plan, prepare and execute, you can’t cut and paste a European or American plan and superimpose it on your refinery here in Asia. The wider solution lies with governments, businesses as well as citizens to address our climate change crisis.
So where to begin? If we can’t get to the downstream of the future from where we are, how can refiners incorporate energy carriers and systems not currently widely deployed? How do we integrate across businesses, explore synergies and new products in ways we’ve never done before? Making the pivot involves not only choosing the right technologies, but a complete assessment of the downstream operational and financial realities that can make or break such an ambitious redirect.
Asian refiners have to remain profitable enough in the short term to pay for this decarbonisation shift in direction, yet visibly demonstrate to shareholders and analysts that they are putting their resources behind their promises to realize their targets.
Which transitional options have worked elsewhere?
Energy conservation is the first step that refiners will take. Using less energy is the most direct way to reduce the footprint of the site. An in-depth review of the processes and utility systems is required, usually yielding profitable opportunities. As all refineries are different, the emission reduction comes from selecting the best combination out of multiple possible solutions.
As far as integration with the petrochemicals industry goes, demand for petchem feedstocks remains strong, and begs for strong connection with refineries. Refineries may be stuck with a surplus of certain types of molecules, but there might be an outlet or market for these and so this may also be turned into an opportunity.
For example, where refineries burn fuel gas that is produced in their own processes, causing a significant proportion of their CO2 emissions, a part of this gas may be suited for export to chemicals plant. It will be an interesting option to consider the optimization of refinery processes to support such integration.
What technologies or solutions are already out there?
Hydrogen is likely to play a crucial role in the energy palette of the future, as a carbon-free fuel for the industry, a transportation fuel or as a flexible source of energy. Green hydrogen (emission free) is in many cases obtained from electrolysers that produce hydrogen out of water, using green electricity as energy source. Many refiners are currently building electrolysers, albeit still on a relatively small scale, to provide hydrogen for use in the refining processes. An extension to producing hydrogen as a refinery product is interesting but challenging, in view of the requirement for large amounts of green electricity. For some with access to green power, this may be a competitive niche advantage.
Next generation technologies for bio-diesel and bio-gasoline are emerging, mostly operating on feedstocks that do not compete with food crops. Biofuels will likely replace traditional fuels to a larger extent – at least until combustion vehicles are phased out completely. Good knowledge of local feedstocks is important, including an understanding of the complex logistics and treatment involved in their supply to the refinery.
Where is technology headed – today and in 10 years?
New opportunities are emerging to provide shipping with non-carbon fuels. For example, will ammonia replace fuel oil? In the coming years, the market will see a range of new developments. Who will be the first movers?
The downstream of the future is likely to incorporate energy carriers and systems not currently widely deployed – and include integration across businesses and products not typically seen today.
Tackling the energy transition conflict – is change management the answer?
In some ways, the downstream business is like every other business – it has made a lot of money doing things the old-fashioned way, and is resistant to change. In other words, not everyone will see the end of the age of carbon until it’s too late. Decarbonisation is a long-term commitment, not a short-term fad.
The refineries which are making the most progress in terms of pivoting are those who have a committed senior leadership team and invest in not only the technologies, but the project integration and change management required to see the changes through to fruition.
And it is important to note that companies only change as much as their employees are willing to change – it’s a mindset, not just a technological shift that is required. In some ways, mindsets can be harder to address, and may require sustained efforts to get everyone in a refinery – from the operator to the owner – behind the new way of working.
Where concept meets reality is when a detailed roadmap can be drawn up, and project realisation experts can chart the path forward. Having seasoned hands that have seen dozens of these projects through from start to finish can make all the difference between a lackluster outcome and a best-in-class shift that is the envy of the region.
Case Study – Germany
A decarbonisation roadmap requires an integrated review of all options, and a selection of solutions that fit in the company’s development strategy and offer best competitive value. This is where we help our clients to make the difference.
Recently, Petrogenium conducted a series of detailed framing workshops for a northern European refinery. We sent in some of the industry’s top decarbonisation, technical and project realization experts to undertake a thorough road-mapping exercise. The design was to align the right stakeholders behind the right investments in technology. This step-by-step approach can deliver the long-term results customers are looking for.
Reducing CO2 emissions is not as easy as the public and many governments may believe, and the framing workshop can flush out the challenges as well as the opportunities to success. Meeting current business needs whilst simultaneously building for future market demands is not an easy balancing act.
Petrogenium helped this customer develop a roadmap that allowed them to remain profitable, yet extended their current business model. We took into account the refinery’s configuration, market opportunities, government incentives and existing operations. A three-phased scoping process involved looking at current operations, indirect emissions and emissions from the use of products – both inside and outside the customer’s control.
To see where this article was originally published, visit Asian Downstream Insights.