State of Play
As the pace for climate neutrality accelerates, the role that the oil and gas downstream industry plays in ensuring these goals are met efficiently and affordably, advances. All regions are looking to deliver energy security alongside delivering the energy transition, all the while coping with rising costs due to the energy crisis. Living in an uncertain world, the energy sector is now faced with the complex pressures of balancing Energy Security & Growth with Decarbonization and the Energy Transition.
In this ever-changing environment the downstream industry is also evolving, with boundaries between upstream, midstream, downstream and power becoming blurred. Whether it’s reduce, recycle or remove, success will be defined by clear, significant, and concrete targets.
Historically, the downstream oil and gas sector has always been considered a sustainability driver in terms of being an energy security supplier and a major provider of petroleum derivatives and products. Today, refining technologies have enabled producers to operate their assets efficiently and reliably, where each drop of crude oil and each group of molecules is managed, almost eliminating lower value products. The result is visible and modern life simply would not be what it is today without the support of the downstream oil and gas industry. The majority of transportation, whether personal, commercial, by land, by sea, air, and rail, all rely on liquid or gaseous fuels, produced by the downstream sector.
This is also the case with petrochemical products which facilitate our daily lives and touches every sector; health, communications, construction, etc.
Demand drives the markets and production. The technology innovations from the last few decades have provided endless possibilities, most of which were unimaginable just a century ago. However, the fossil resources are not renewable and at some point, crude outputs will start to decrease. The predictions, which are based on predictive models and periodically updated, clearly show this trend even if it will take some time.
So in truth, the current energy transition agenda is not just a technology issue, but rather a global sustainability plan, where achieving climate goals (on time) will be crucial for future generations and will need to be balanced with the increasing global energy demand.
Downstream Assets: An Essential Part of the Solution!
This brings us to the question, how can today’s refineries play an integral role in reaching climate goals? It should be clearly stated that Downstream Producers have been proactive in looking at ways to reducing their environmental footprint, and at the same time being key energy providers and remaining competitive in difficult conditions. Each asset or complex should be treated individually – there is no ‘Silver Bullet’ solution that is applicable to every facility. The first step for all major Refiners, Petrochemicals and chemical companies is to improve present operations by improving energy efficiency, reliability and reducing current emission levels from their existing facilities. Reaching those ‘Low Hanging Fruit’ is a priority.
Other routes are being evaluated such as further Refining and Petrochemical integration opportunities and diversification through co-processing opportunities with bio-feedstocks and implementing plastic recycling technologies.
In reality, even in a declining market, the world is still heavily reliant on mid-distillates and diesel and this has to be balanced with the climate regulations that are being introduced. Where scope 1, 2 & 3 emissions will be part of the benchmark for success.
So, to stay competitive and meet the changing demand, operators must adapt their existing assets in a sustainable way, requiring extra production and technology flexibility. For example, worldwide the most used liquid fuels are gasoline, diesel, jet fuel and marine fuel and these can now be produced from sustainable feedstock - This can be either 100% or blended with conventional feedstocks.
Interest in Hydrotreated Vegetable Oil (HVO) and Bio-Ethanol is very much present, since these fuels (or components) can be designed in a way to be a drop-in solution, meaning that Internal Combustion Engines (ICE) powered vehicles will not need any interventions in order to run on these sustainable and blended fuels.
We clearly see the evolution in the field, eliminating the issues from the first generation biofuels, for instance newer generations have great Cold Filter Plugging Point (CFPP) standard properties, which have unlocked a major new opportunity (and segment) in the name of Sustainable Aviation Fuel (SAF).
Sustainable fuel technologies are available, scaled up and will be ready to meet the future demand. The question for operators, in terms of implementing these new technologies, is whether it is better for them to be the front-runners or the first fastest followers. Each company needs to weigh up the pros and cons.
Producers are having to balance securing their business, remaining competitive whilst looking to reshape the downstream industry into a lower-carbon model – no easy task.
An added difficulty is that even in a disrupted oil market, renewable feedstocks and renewable fuels remain less cost competitive compared to their fossil counterparts. In this case, businesses and society have to understand, that the sustainable and renewable future we are aiming for will have different dynamics and different variables, compared to the traditional forms of energy.
Hydrogen – The Designated Game Changer
Hydrogen, especially the green production route, has been touted as the “Holy Grail” of the sustainability journey, a major decarbonisation medium and possibly the ultimate solution. We have seen this in many high-level industry discussions, current investments and potential projects.
However, as mentioned before, a successful future energy mix will be a combination of several alternative energy solutions.
Looking at hydrogen, there still remain a number of hurdles to overcome – these include the scalability of production of green hydrogen, the existing and future infrastructure and last but not least the market demand and consumer willingness and ability to cope with the energy transition.
The scaling up electrolyzers is already happening, confirmed by the presence of the Norway’s HydrogenPro project, the largest industrial electrolyzer built so far - diameter of 2 meters. There are also, Germany’s 24-megawatt (MW) installation in the Leuna Facility and the 8.75MW) PEM electrolyzer in Wunsiedel.
Western Europe is very much at the forefront in terms of green hydrogen production. Many countries are investing and developing infrastructure to allow further implementation. Building sustainable infrastructure is critical and therefore consistent, and reliable government & EU regulations are required for successful implementation.
Speaking of infrastructure, Europe already has a strong gas transmission network, which could be potentially used in certain circumstances.
These existing pipeline networks have been designed to transport natural gas and simply switching to 100% pure hydrogen is not possible. Hydrogen can easily diffuse through metal surfaces because of the material science compatibility laws. Also, Hydrogen is a much smaller molecule than methane in natural gas, which means that leakage rates though pipeline walls and joints may be greater - meaning raising safety concerns and economical issues. Certain metal pipes used for transporting natural gas may also degrade over time when exposed to hydrogen, especially in the presence of high temperature amplitudes and pressures.
However, if we consider blending hydrogen and natural gas then these networks can become a potential option. Of course, complex engineering challenges remain to repurpose existing networks, associated with safely transporting natural gas blended with hydrogen over more than 200,000 km of transmission pipelines, over 2 million km of distribution network and over 20,000 compressor and pressure reduction stations in Europe.
Unfortunately, there is no quick method to investigate whether a pipe might become compromised due to hydrogen exposure since the damaging mechanism takes time to manifest, therefore precise studies and empirical tests are currently being performed. Armed with in-depth knowledge of their pipeline systems also implementing accurate risk assessment and gap analysis, network owners and operators may be able to determine the safe proportions of blending natural gas and hydrogen, resulting in lower carbon intensity of the energy they supply to the end users.
The ‘Green Hydrogen’ solution has merit. Once the engineering challenges overcome and technology, infrastructure and consumer behavior in place, hydrogen will provide significant environmental benefit. Notably green hydrogen, which can leverage periods of low sunlight, wind and can also act as a battery. It is an energy carrier that can ensure energy supply in times where renewable sources are not in their highs.
As an energy carrier, hydrogen can be stored in a liquid organic form, as Ammonia (NH3), which requires 125 psi (862 kPa) of constant pressure and temperature below -33.6 °C, while pure hydrogen requires temperature as low as -252.87°C and pressure of 14,7 psi (101,3 kPa) to transform into liquid form.
From this simple comparison it is clear that LOHC (Liquid Organic Hydrogen Carriers) storage and transportation options present a more promising solution. One thing is for certain, hydrogen will be a substantial part of our future daily lives, but as mentioned above, it will not be the only sustainable solution.
Raising the voice of the downstream industry
The Downstream industry has a role to play and should be seen as part of the solution. At the last COP26 conference the lack of downstream sector representatives elevated concerns that Governments intend to solve the energy issue without the expertise and experience of the downstream sector and in the case of carbon, the complexity of the problem isn’t being fully recognized.
There is a distinct mismatch between the want to have zero emissions, and the transition that must happen to realise it, as well as a lack of dialogue between those making policies and those required to deliver it.
Without the input of the industry, poor decisions are likely to be made with sub-optimal outcomes.
A recent example is the ban of plastic straws, which had no material impact on consumer polymer use but the reality that the replacement material created more carbon emissions.
Without the input of the industry, poor decisions are likely to be made with sub-optimal outcomes.
A recent example is the ban of plastic straws, which had no material impact on consumer polymer use but the reality that the replacement material created more carbon emissions.
Written by:
Published by:
