May-2022

Refiner’s future role in the energy industry

With the global population swelling and industrialization on the rise in developing nations, humanity’s hunger for energy has reached unprecedented levels.

Rene Gonzalez
Editor, PTQ

Article Summary

In parallel, energy sources are diversifying. It’s hard to believe, but despite the evolving diversity of energy sources, there are still a lot of people around the world (about 1.2 billion) who do not have access to refinery products or renewable energy services.

How to cope with the impending hike in refinery and petrochemical products expected in the coming decades without harming the environment requires sustainability-based approaches.

The role of renewable energy in meeting energy demand is without debate. The real challenges is balancing renewable energy with hydrocarbon resources. Compared to a decade ago, much of the “balance” depends on meeting sustainability edicts defined by the UN and other institutions committed to addressing climate change. This goes without saying that environmental costs of renewable technology are emerging, such as the mining of precious metals and rare earth minerals required for batteries for storing energy in large quantities.

A big challenge in the energy business concerns the economics of renewables. Effective storage of energy from solar and wind is still a long way off. Perhaps this challenge can be mitigated if the global economy can agree on development of transnational supergrids and power-sharing deals between countries, but this in itself is a challenge because developing countries still prefer fossil fuel-based refined products that are easy to store and transport.

Opportunities available from biofuels, electrification and transition to renewables have been identified. For example, hydrogen is widely seen as a long-term solution, but refinery products and LNG will dominate for the foreseeable future.

Companies like BP are investing huge sums into developing alternative production lines. Yet, these fuels will not halt the release of greenhouse gases into the atmosphere. Even by 2050, we could still be getting 75% of our energy from traditional fossil fuels. A critical objective will therefore be to figure out how to reduce carbon dioxide (CO2) emissions from refinery and petrochemical operations.

Lowering the cost of carbon capture storage (CCS) and utilization could involve a shift away from efficiency and towards continuous optimization instead. Meanwhile, policymakers need to work with the energy industry to address infrastructure requirements of diversified energy sources. A key objective going forward is to rethink financial strategies such as with the issuance of sustainability-linked bonds.

Outside of the refining business, energy companies are beginning to issue sustainability-linked bonds, such as with linking to the percentage of recycled frac water available to upstream operations. The execution of other energy transition strategies could be on a transnational scale, such as with the connection of energy grids among several countries so electricity can be shared between nations.

The energy industry’s transition to net zero may predicate available capital going to sustainability-based investments targeting processes and their product streams. To facilitate execution of these bespoke objectives and milestones, a wide range of industrial initiatives and government policy schemes are underway towards the integration of a sustainable energy sector into the circular economy. Building scale for sustainable energy processes means building demand for their respective products, a demand that cannot currently be satisfied.

For further clarification, creating demand for electrolytic “green” hydrogen could require an expansion of the scope of this fledgling opportunity by also taking a detour via “blue” hydrogen production, which reforms hydrogen from natural gas and captures CO2 emissions. Several countries and numerous energy companies are well on their way towards developing the infrastructure for a sustainable energy sector.