Heath DePriest, Vice President, Emerging Energy at Phillips 66, shared his opinions on some of the key issues currently facing the industry including the proliferation of regulatory regimes and legislative uncertainty; ensuring the right conditions for project implementation and the opportunities for localised supply chains.
Looking at the US, and proliferation of regulatory regimes - how can the industry move forward and invest in net-zero despite lacking cohesive legislative certainty?
It’s pushing us as participants to think more near-term and take things one step at a time. Given multi-year planning and permitting processes, the industry needs more legislative and regulatory certainty, and this will take working closely with government as they shape policies.
There are steps we can take now where current regulations can offer support to attract needed investments which will move developing technologies along their respective cost curves. As we look across the opportunity set, we are selective in where we want to participate by leveraging what we know and applying our existing expertise to be able to create the most value. For Phillips 66, we see the most near-term opportunity across four pillars: Renewable Fuels, Battery Materials, Carbon Capture, and Hydrogen, and that’s where you’ll see us focus.
Following on from the first question, what does this lack of certainty and consistency mean for the deployment of capital given the uncertainty in the future landscape?
Ultimately it introduces a risk component into a project which adds difficulty in making financial investment decisions. Given that regulatory uncertainty and higher risk profile, we look to deploy capital where our existing positions of strength, competitive advantages, and current regulations can help drive shorter payback periods and align with our returns-focused approach.
How important is it to have the right partners, the right technology, in the right location?
All of those considerations are key drivers for any successful project, and these are no exception. If anything, they are even more important in this newer and rapidly evolving space, so making sure we’ve done the due diligence on a variety of technologies and pathways is critical to maximize returns and ultimately provide ourselves with a long runway.
Value chains are complex. Having the right partners with complementary expertise and who can share capital risk is critical. Our European hydrogen joint venture is a great example as we build from our existing strength in the European retail market through our JET brand and partner with H2 Energy, a leading hydrogen provider. Another example would be our investment in Novonix, a leading battery materials and technology company that is set to become the first commercial-scale anode producer for EVs in the US.
Value chains are complex. Having the right partners with complementary expertise and who can share capital risk is critical.
Furthermore, our work with Southwest Airlines and British Airways on SAF speaks to the importance of having the right technological capabilities. Airlines are trying to solve their decarbonization challenge and our technical expertise can help with that. Today we are supplying SAF to British Airways at Heathrow.
As to the right location, our Rodeo Renewed project is a perfect example. In the US, California leads in GHG reduction targets and our renewable fuels project there will be delivering renewable diesel and SAF to the market. California policies incentivise these types of projects in their state.
“Balkanization” and the drive for localised supply chains – what are the opportunities and inefficiencies?
Relying on localized supply chains offers security of supply in an effort to be able to weather global disruptions and geo-political influences all while supporting local economies.
Ultimately it’s a trade-off between supporting that local market and enabling greater efficiencies through specialization of skills and resources in the global market. Those can come in the form of natural resources, labor, and existing manufacturing capabilities.
A shift in the status-quo can itself cause disruptions, which we’re seeing in the solar panel market with the current investigation into potential tariff avoidance leading to volatility in the market. It’s not an easy answer, but there needs to be some sort of balance to ensure fair competition without compromising global efficiency.
Finally, what do you hope the discussion from a conference like ESF North America will help the industry to achieve over the next 12 months?
We believe that energy industry incumbents, Phillips 66 and others here today, are best positioned to lead through the energy transition. We have the expertise and skilled workforces; we know how to move molecules and electrons and how to optimize assets. But we do need regulatory support to move at the required pace to meet global climate goals.
I’m hopeful the discussions that we have at ESF North America will inform and influence action by legislators to put policies in place that incentivize private investment in low-carbon initiatives and provide certainty that the rules of the game will not be changed on us down the road. A drive towards consistency and stability in regulation across various levels of government is ultimately the end goal.
