PTQ Q3 2022 Issue

Vol 27 No 4 Q3 (Jul, Aug, Sep) 2022 ptq PETROLEUM TECHNOLOGY QUARTERLY

The energy transition: maybe later?

C ertain refiners report high margins in an otherwise flat-margins fuel market. The current 3 million bpd crude oil production deficit caused by policies and regulations affecting the market has led to the highest recorded fuel prices. The ideal scenario is to capture high fuel margins while they last and stay on course towards expansion of the petrochemicals value chain, preferably with a staged investment approach. Brent crude oil prices will average $140/bbl this autumn, according to Goldman Sachs. Nevertheless, fuels and petrochemicals from fossil feedstocks are expected to dominate energy markets for decades. In parallel, the sages have spoken loudly that electric vehicles (EVs), renewable fuels, and biofuels would provide a better and somewhat less expensive energy alternative with zero-emissions benefits. Green energy promoters may have overlooked the cyclic effect on GHG emis- sions from other industrial sectors like mining and its importance in the extraction of precious metals needed for EVs. For example, the projected transition to EVs isn’t happening largely due to a shortage of precious metals (cadmium, cobalt, lith- ium, platinum). Mining costs are increasing in proportion to diesel costs used to run heavy machinery and remote power grids favoured in metals extraction operations. Like the global microchip shortage, precious metal supply is insufficient to sustain an expanded EV market. Estimates are that each EV requires about 2.2 lb (1.0 kg) of precious metals. EV transaction prices are exceeding $60,000, which is one reason why demand for fossil fuels and their well-established supply and distribution infrastructure is preferred. Nevertheless, many hydrocarbon and chemical processing innovators concur that global CO 2 emissions are too high (exceeding 34 billion tpy) and are investing in natural gas, renewables, and biofeedstock for near-zero emissions. These developments are why PTQ is a strong supporter of the October Refining India 2022 Conference, providing an opportunity to meet experts on increasing fuels production, improving energy efficiency, and directly linking refinery opera - tions with the expanding petrochemical value chain. For example, there is a busi- ness interest in reconfiguring a refinery’s final conversion sections. In expanding markets such as China and India, there is scope for reconfiguring refinery assets towards naphtha production to maximise feedstock for downstream aromatics production while making efforts to secure high margins in the fuels mar- ket. But with naphtha production constraints, other fuel production alternatives, such as gasoline and diesel, need to be considered. In fact, opportunities emerge to leverage existing hydroprocessing and FCC operations for renewable fuels and biofuels production while maintaining high run rates. Biofuels’ high oxygen levels and efficient combustion for lower emissions are important factors for sustainability-focused investors to weigh when reviewing new technology. Petrochemical margins in the post-pandemic recovery are approaching $1400 per tonne compared to $550 per tonne for transportation fuels. Let’s not overlook that adoption of automation on a large scale is increasing human-machine interac- tion at those refinery facilities with high sustainability rankings, leading to better returns. More importantly, the execution of these connectivity strategies is foremost to linking renewable and biofuels processes to plant utilities and new petrochemical assets, to be discussed in the PTQ Revamps special report.

Editor Rene Gonzalez editor@petroleumtechnology.com tel: +1 713 449 5817 Managing Editor Rachel Storry rachel.storry@emap.com Graphics Peter Harper Digital Editorial Assistant Ciaran Nerval US Operations Mark Peters mark.peters@emap.com tel: +1 832 656 5341 Business Development Director Paul Mason sales@petroleumtechnology.com tel: +44 7841 699431 Managing Director Richard Watts richard.watts@emap.com Circulation Fran Havard circulation@petroleumtechnology. com

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PTQ (Petroleum Technology Quarterly) (ISSN No: 1632-363X, USPS No: 014-781) is published quarterly plus annual Catalysis edition by EMAP and is distributed in the US by SP/Asendia, 17B South Middlesex Avenue, Monroe NJ 08831. Periodicals postage paid at New Brunswick, NJ. Postmaster: send address changes to PTQ (Petroleum Technology Quarterly), 17B South Middlesex Avenue, Monroe NJ 08831. Back numbers available from the Publisherat $30 per copy inc postage.

Rene Gonzalez

PTQ Q3 2022