Decarbonisation Technology - May 2024 Issue

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Crude oil rening HVO production

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Figure 7 La Mède earnings (with HVO forecast from Liquid Renewable Fuels Service)

co-producing biofuels or developing dedicated biofuel production facilities. Refiners with a weak competitive position, located in declining demand centres such as Europe and parts of the US, are already converting some refinery sites into bio-refineries or co-producing biofuels. A small bio-site is often a more attractive business than a larger, competitively weak crude oil refinery, as shown in Figure 7 . Having secure access to a supply of waste feedstocks is a key competitive advantage in the supply of such biofuels, as waste feedstock availability is limited. Investments are not just needed in building processing capacity but also in the development of feedstock supply chain infrastructure. The whole aggregation industry must transform by improving collection methods and developing capabilities to make the supply chain efficient. Feedstock supply can be secured by several strategies, including partnerships, acquisitions, equity investments, and developing one’s own supply chain and renewables, new production technologies, such as alcohol-to-jet, biomass pyrolysis or gasification, and the Fischer–Tropsch process, will need to be scaled up and enable a wider range of non-food feedstocks. Many of these technologies are either at nascent stages of development or are capital intensive and require significant amounts of low-carbon hydrogen. Conclusion Refining has recently benefited from geopolitical events, which have reduced the intensity storage infrastructure for collection. To meet long-term policies for liquid

of global competition through introducing inefficiencies in the trade of Russian exports and inter-regional trade via the Red Sea. Wood Mackenzie’s long-term outlook for refining suggests refining margins will remain healthy over the medium term but not repeat the highs of recent years. Refining is an industry with long lead times for investment, so now is the time to plan for the impact of the energy transition, “ European refiners are competitively weak, so it is necessary for them to adapt first and shift their businesses from volume to value focused, with waste-based liquid renewables and RFNBOs providing the opportunity for re-invention ” which will result in the demand for fossil- based refined products peaking and then declining. The outcome of ‘doing nothing’ is clear – the pandemic taught us that. Now is the time to plan to adapt and establish how to secure value growth through diversification away from transport fuels. Many European refiners are competitively weak, so it is necessary for them to adapt first and shift their businesses from volume to value focused, with waste- based liquid renewables and RFNBOs providing the opportunity for re-invention.

Alan Gelder alan.gelder@woodmac.com