Sustainability rankings matter
From the workers on the production floor to corporate management pursuing higher returns, the common bond in the 100+ year old refining business is cultivation of high sustainability rankings. A high ranking attracts investors evaluating the market and cost factors for renewable fuels production, petrochemicals, as well as ultra-clean fossil fuels.
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Petrochemical margins in the post-pandemic recovery are approaching $1400 per tonne compared to $550 per tonne for transportation fuels. This partly explains why refiners and their investment partners are seeking the most effective transformational strategies to exiting the declining fuels market while shifting to petrochemicals and renewables. The rewards are considerable, but so are the challenges.
When dealing with tighter product specifications affecting fossil fuels, there is also the realization that demand for these fuels is declining while regulations for minimizing emissions (e.g., CO2, SOx, NOx, etc) during their production are increasing. In addition, the industry is challenged by the loss of skilled labor, access to financing, trade barriers, higher utility costs, etc.
No longer cost factored as a utility, any sustainable refinery strategy requires efficient use of hydrogen and water. Hydrogen will become more crucial because it improves hydrocarbon performance at the molecular level. Just as challenging is water scarcity, which is used to regulate temperatures in refinery operations, including those units that have been converted to produce renewable fuels and petrochemicals.
Sustainable principles help achieve corporate objectives including the flexibility to quickly change products in an increasingly complex environment. For example, while the renewable energy sector is minting new millionaires, the most competitive refiners need to stay focused on producing “clean” fuels from oil-based feedstocks while developing value creation strategies based on renewables and biofuels.
However, the recent pandemic changed all that, to the benefit of those refiners with the ability to rapidly retool for petrochemicals production, while others already in the advanced planning stages of capturing value in the renewable fuels market accelerated their plans. While energy demand is expected to increase by 58% over the next 25 years, renewable fuels can represent 50% of a refiner’s profits!
Corporate 2021 annual reports validate that refiners believe future refinery and energy objectives are based on the adaption of sustainability strategies to lowering carbon. Sustainability and efficiency objectives are delivering results. How else could an industry processing 18 million bpd of oil per day in 1981 at 351 facilities are processing more feedstocks today with only 109 refineries?
Adoption of automation on a large scale is increasing human–machine interaction at those refinery facilities with high sustainability rankings, leading to better returns. In parallel, data generation continues to grow exponentially, as every physical piece of equipment, from large compressors to small secondary pumps, are being connected to the cloud. More importantly, execution of these connectivity strategies is foremost to linking renewable and biofuels processes to plant utilities.
Integration of sustainable strategies into a refiner’s investment choices, processes, R&D, etc., is paramount to incorporating lifecycle doctrine into the early stages of new product development, such as for renewable diesel. Based on these developments, the refinery of the future must respond quickly to changing market conditions, switching from one product slate to another as profit margins change.
To ensure sustainability, each facility will no doubt take on some of their own specific initiatives, such as 100% reuse of effluents generated on-site, or conversion of naphtha-based hydrotreaters to renewable diesel production. Above all, the industry needs to balance increased regulation, build their brand and securing stable supply chains.
Achieving this bespoke balance provides stability for enhanced performance. Sustainability stewardship gives refiners vision to face new types of competition, such as electric cars. Going forward, the industry’s ability to assess and improve lifecycle impacts based on Global Reporting Initiative (GRI) standards helps fulfill commitments to achieving superior returns in a volatile refinery market.
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