[Stefan, VP, Euro Petroleum Consultants]
Good morning, everybody. Today, I'm very pleased to be joined by Dan Carter. Dan is President of Decarbonisation at Wood. Wood is one of the World's leading consulting and engineering companies operating across energy and material markets.
We're very honoured to have Wood as a Platinum Sponsor for the conference, and they will also be holding a pre-event seminar focusing on collaborations. The seminar is entitled: “Stronger Together: How Collaborations are a Game-Changer for the Downstream Industry”.
We're delighted to catch up with Dan today, ahead of the conference to discuss on some of the key topics facing the Middle East downstream sector and the wider industry as a whole in its journey to a more sustainable future.
So Dan, a warm welcome to you and thank you for taking the time to speak with us today.
[Daniel Carter]
Thank you, Stefan. Good morning to you as well.
Good morning. I'm going to start off by looking at some of (we've got a few questions to get through) the key topics that we'll be addressing during ME-TECH and, also during your seminar. Just to dive straight in: looking at the producers, looking at the existing assets around the world, what do you feel are the units and, particularly the units that the producers have to keep maintaining, upgrading and, also expanding during what is a global energy transition period. What would you say are the key things to look at?
Thanks Stefan. I think the industry is probably evolving now at the pace more rapidly than we've seen in the last several decades, and the core driver here for the producers in the Middle East is really to keep pace with those markets and develop their leadership position within them.
When you start to look at a lot of the assets within the Middle East, they're more modern, they're already a lot more efficient than the assets in Europe, as an example. But there's probably still work to be done in maximising the efficiency of those assets and from an energy consumption point of view, particularly in those geographies where you know energy has been cheap.
So how can we focus on maximising fuel efficiency and yield efficiency from some of those assets, but also focusing on the level of conversion of some of the key units that drive the economics of these refineries? Things like the fluid catalytic cracker, the AC unit or the hydrocracker. How can some of those units be repurposed to maximise propylene production as a precursor for petrochemicals? And how can those units be integrated with petrochemical facilities?
As you know, that theme of refinery and petrochemicals integration is one that we've seen over a number of years, which has multiple drivers. One of those is ultimately to increase value from the integration of downstream complexes. We've had projects looking at very large-scale delivery of integrated refining and petrochemicals. Not so many actually, looking at how you can make the most of synergies between existing assets in terms of the transfer of streams that make good precursors and petrochemicals production, like straight run naphtha that's been hydrotreated and maybe some of the streams that can be returned to refinery, for example: steam cracker pie gas, as a potential for gasoline blending and production.
So, a lot of integration opportunities we can look at across that existing asset base from both an efficiency, a yield improvement and a product development point of view.
Definitely. There's a lot of interesting points to look into and to further develop. There's also a lot of talk when we're looking at sustainability. There's a lot to talk about introducing what are sometimes talked about as being exotic feedstock, Co-processing with renewable feedstocks.
If we're looking at our existing assets, but also looking at specific pieces of equipment, how are these classic pieces of equipment, will they be able to handle mixed or fully renewable feedstock or will these cause bottlenecks in the operations?
If you look at the challenge globally, then, we've seen a lot of refineries start to look at repurposing their existing assets towards renewables production. For example, you know the facilities in Venice or Jayla, Rodeo for Phillips 66 in North America and the premise there has been very much taking the existing equipment, upgrading where possible to be able to produce or to be able to utilise those feedstocks and that comes to: can pressure vessels handle higher pressure hydrotreatment required to be able to process these types of feeds.
So it becomes looking at individual equipment Items on the piece-by-piece basis, rating them against that new feedstock requirement and then looking at the modifications involved.
If you start to take that challenge and more towards the Middle East as an example, then perhaps the quantity of bio feedstock available in the Middle East isn't as much as it might be in Europe or Southeast Asia.
So, then what are the other possibilities that lend themselves? You can start to look at, thinking about refinery or petrochemical production as an energy complex and the opportunities that integrating with green products through the hydrogen value chain might happen, so you might end up with the green hydrogen project from solar power producing feedstocks like methanol and how can like methanol then be integrated into petrochemicals production to be able to make both new and existing products.
And I think it very much it's it tends to lead itself to a case-by-case or asset-by-asset basis in terms of the areas that need to be considered for upgrading and repurposing.
But there is definitely plenty of opportunity to think about how alternative feedstocks can impact on the overall value of our downstream complexes.
Yeah, I think the very important point is to treat all these things case-by-case. What might be true for one side, not obviously or necessarily true for another. I think it's important to identify each asset's specifics.
Especially the way assets have evolved overtime right with different upgrades, bolt ONS, add-ons. You know, even just going back and looking at the design basis and the way those assets and they documented/recorded, sometimes you have to do a lot of digging into finding out the actual state of current equipment in order to be able to look at how you can repurpose the solid spaces.
Yeah, for sure, definitely. Looking at the downstream assets, some of these downstream assets and looking at some, another topic that's very much on the agenda is, hydrogen. So we know traditionally, a lot of these downstream assets are consumers of hydrogen, but could they be developed or certain of these, developed into hydrogen exporting assets to support decarbonisation?
I think the answer to that stuff is absolutely. Perhaps we'll talk a little bit more about this in the conference as well, but refiners, petrochemicals producers are used to producing. They're used to handling hydrogen, which many other industries are not. Those skill sets exist within the assets, within the operators.
If you start to think about how you're going to decarbonize your asset, then really the two big levers you can pull on from the downstream point of view are carbon capture or their refuelling and refuelling with hydrogen and you get into a circular discussion. For example, if you capture CO2 from your key producers likely to be your hydrogen plant, your utilities, boilers, FCC unit and maybe where you have them coke calciner as well. So not just units that consume fuel, but also where you have process emissions. You actually then need more fuel to power that CCS as well.
Now then, if you want to decarbonise those harder to decarbonize heaters and process furnaces, and you start to look at hydrogen, you can produce more hydrogen, but then at the same time you're going to run along on your fuel gas balance. And therefore your fuel gas balance could be integrated back as a feedstock for hydrant production, hence the circularity of the argument.
Some of the things that we've been looking at with our own technology developments are how you can actually harness this as an opportunity for refiners by Co-processing additional hydrogen feedstock in addition to carbon capture to produce more hydrogen from your own unit, to satisfy your demands, but also potentially, then have a side stream hydro and export to other industrial consumers for them to use as a fuel.
This is where you get into the big challenge of the hydrogen economy, right? Which is production and consumption. They have to equalise, you know, if we're going to invest large scale capital and production, it has to have a home and that home has to come on the stream at the same time as production. So using it as a drop in fuel in existing industries like refining, like petrochemicals production, is a very good way of seeding that hydrogen economy through existing large-scale consumers.
You know, there's definitely a lot of developments and a lot of avenues to be explored within hydrogen, its usage and, also its production.
I've kept the big question for the last. We see around the world the way we live, energy demand will continue to grow. We're going to have to supply diverse markets, diverse products, but how can we balance that with complying with, and meeting climate goals and at the same time obviously reducing environmental impacts. How can we balance those two?
Yeah. So, if you start to look at the essentials for delivering the energy transition, really your two essentials and delivering the energy transition and the availability of raw materials through the mining industry, copper, lithium, other essential metals for batteries, for EVs, et cetera. And they're also how you can make oil and gas production more sustainable. And let's face it in the large part, the oil and gas industry are going to pay for the energy transition and we see this globally with the announcements that come from what's BP, Shell, Exxon. But also regionally within the Middle East with large NOC's like Saudi Aramco, ADNOC investing large capital amounts and decarbonization alongside the expansion of their production of their existing assets.
So how do you couple the two? Well the 1st way is actually to make it more sustainable, so to look at technologies like carbon capture alongside oil and gas production. And the second is then to look at how you can maximise the diversification of your products, or your product mix, throughout the value chain.
And his hasn't changed, particularly in the Middle East for a long time. The Middle East has been a traditional exporter of large quantities of oil and gas. Various geographies are looking at how to diversify away from that to create secondary, tertiary petrochemicals products which also then lead to the development of industry within the geographies themselves.
You know, you can go and buy a Saudi derived electric vehicle if you want to, because that investment has gone into the value chain.
So diversifying the product mix, producing more petrochemicals, sealing those downstream industries are going to be core to both profitability, but it has to go hand in hand with reducing the carbon footprint and the footprint of other emissions from these industrial sources. And as we all know, the more complex your assets get, the more fuel you consume, the more CO2 and other emissions you're going to produce.
So, it has to be designed in really from the outset in terms of these development projects. We've seen holdups, a number of petrochemicals projects around region recently you know, things like the KIPIC’s PRIZe project in Q8, the Saudi Aramco - Total joint venture at Satorp, petrochemicals developments in Oman, and elsewhere in Saudi that have really been held up by two main concerns, one of them being the state of the global economy and the value for export markets and the availability of capital associated with that. The other being how do we make these projects more sustainable and more investable. They are inextricably linked. The project has to be sustainable to attract external capital, like external capital is required to create the diversification in either in the industry.
Definitely lots of questions to answer. A lot of considerations to take into account and also I think the energy transition, decarbonisation, it needs to be seen also more so as an opportunity. Obviously, there's going to be challenges, but it needs to be seen as an opportunity to make the industry more diverse, answer all the questions, find all the right solutions. So I think that that's very important.
And it's definitely an opportunity and you look at some of the mechanisms that are starting to come in place, you know the EU has started the consultation around the cross-border adjustment mechanism, which refers to a number of products like hydrogen and their carbon intensity.
Now in the Middle East, the size and scale of production you have should lead to those levels of efficiency, even when you deploy solutions like carbon capture that those products can be produced with a very low carbon intensity and therefore be able to attract a premium on the international export markets.
That's a work in progress, but that's definitely the direction the marketplace is heading towards. But it creates an opportunity. It creates an opportunity for the energy transition to pay for itself through the diversification and delivery of low carbon products.
Yeah. And I think going back to the seminar that you'll be holding, I think that can be achieved through discussions and through collaborations. I think those are key, to make sure that all the different parties involved, are at the same table, have their words, you know, have their say. That's the only way that we're going to reach the goals that we set for ourselves.
Clear alignment on those priorities and the proper process to be able to plan for the development of those assets and subsequently deliver them.
Yep. Thank you Dan for your time. It's been a real pleasure speaking with you today. We've looked at some of the key industry questions. Really looking forward to expanding on those during the event. And also, as I mentioned during Wood’s seminar, focusing on those collaborations and how those can be a game-changer for the downstream industry. So, a big thank you, Dan.
Thank you very much, Stefan. And we'll see you in Dubai.
Thank you. Looking forward to it.
Wood is a Platinum Sponsor of the upcoming ME-TECH, taking place on 16-18 May in Dubai. Join us in Dubai to hear more from Dan Carter and the Wood team.
Don’t miss the opportunity to attend their pre-conference seminar "Stronger Together: How Collaborations are a Game-Changer for the Downstream Industry". Places are limited!
For more info, visit europetro.com/metech