There is a dissonance in the perception of decarbonisation efforts in the downstream sector. Targeted as primary emissions culprits who need immediate answers to troubling emissions levels, and yet the consumption habits demand that refining continues at breakneck speed, despite the declining profits and increasing animosity towards refiners.

Such perceptions overlook the real and tangible efforts refiners are engaging with in order to reduce their impact on the planet.

The mission of many ESG impact investors is to reduce the climate impact in sectors who need to be moved by shareholder interest, more so than outside activist influence. After all, as energy demand grows, emissions reductions are more important than investing in net-zero sectors – as oil and gas products continue to be central to societies’ wants and needs. Notably, three areas will see a major decline in fossil fuel usage; the transport sector, power generation and heating – providing space for the refining industry to make their emissions cuts and assist other hard-to-abate sectors.

Finding the Balance Between East and West

Naturally, when considering ESG efforts and the energy transition, we should look to the example of Europeans and North America. They reflect two-sides of the same coin. On the one hand, refineries exist unapologetically to facilitate the vast array of required oil and gas byproducts. On the other, these are the regions which experience the greatest ESG pressures.

This divergence of priorities is far more difficult to reconcile than most other sectors, obviously refining requires processing petrochemical products using a significant amount of energy – all driven by consumer demand. Therefore, how does a company create a balance that acknowledges consumer emissions concerns and fulfills their desires to maintain consumption habits.

Restricting supply inorganically can create a myriad of problems and unseen disruptions to which most states are similarly unprepared. The industry-led reduction of GHG emissions is far more beneficial to the growing societal demand for refined goods.

In the West: Marathon has shut down their most inefficient refineries, while Valero has committed 40% of their growth capital to new renewables projects. The trend across the US and Europe is that while some refiners are seeking to mitigate emissions through CCUS and other technological advances, these are only in addition to investing in a more diverse portfolio or repurposing existing infrastructures for biofuels, hydrogen or hybrid fuels.

There remains the concern that China and Russia will maintain their geopolitical position of maximizing their use of conventional energy sources. China has stated their intention to grow both oil and gas consumption over the coming decades, but like they have done with renewable technologies, China could prove crucial in scaling crucial new technologies.

Russia on the other hand remains deeply committed to natural gas production and their competitive advantage of using the gas for their refining purposes. And while Russia hasn’t engaged deeply with the transition, the emerging carbon markets could prove an avenue too attractive to ignore.

Pushing Technical Excellence in the Transition

There are three major technological initiatives being used to defer refining emissions; electrification, biofuels, carbon capture and hydrogen. And while these are the frontrunners, it should be noted that refiners have long excelled in integrating modern advances in order to maximize efficiency. While mitigation technologies will make the difference, ensuring the greatest efficiency of processes is core to ensuring a sustainable and lasting impact.

Biofuels and the replacement of high-emissions feedstock with greener and cleaner alternatives has proven the most cost-effective and carbon-effective route to emissions mitigation. Refiners can excel in this space through their innate knowledge of the chemical processes that create fuels. By substituting oil or gas for vegetable or animal fats, refiners can create a biodiesel fuel that is both nontoxic and potentially biodegradable.

Carbon Capture Utilisation & Storage (CCUS) has often been presented as a frontrunner in the solutions gambit for refiners, however it is a costly and underdeveloped technology that requires incredible scale to make an impact on global emissions.

Each climate scenario set-out by the International Energy Agency expects CCUS to play a defining role in the mitigation of GHG emissions. Without pervasive uptake of CCUS, the IEA believes the costs of the ‘transition’ will increase 40-fold. The benefit of CCUS is that it is not just necessary to curtail new emissions at the source where they are most concentrated, but the technology can be expanded to continually reduce our historic emissions too.

An added benefit of CCUS is the creation of ‘Blue’ Hydrogen as a by-product of the process. Hydrogen is anticipated to takeover sections of industrial gas supply, and blue hydrogen accounts for 95% of the market. The sector can therefore expand the range of products that are being refined, with hydrogen-natural gas blends being developed for hybrid turbines, a method refiners and generators are considering for lowering their emissions impact.

Electrification of refineries will be the catalyst for lasting change within the industry. The power required to refine petroleum products is excessive and a drain on the finite resources at our disposal. By powering refineries through renewables, there is the dual benefit of reducing emissions and expanding clean energy.

Moreover, electrification comes hand-in-hand with the digitalization of refineries. The development of ‘digital twins’ to analyse production capacity and improve efficiencies in real-time, is another indicator of the methods in-place to mitigate Carbon, Nitrogen and Sulphur Oxides from the refining process as much as possible.

What Is To Come?

While it isn’t easy to anticipate what technologies are best to solve our climate concerns, there is a growing belief at the IEA, that the industrial and intellectual pursuit of solutions needed to solve the crisis are only being developed.

“In 2050, almost half the reductions come from technologies that are currently at the demonstration or prototype phase.”

The refining sector is undergoing a transformation that requires a strong commitment to carbon reductions, but also a curiosity towards how best to utilize the technologies at their disposal. If the IEA’s claim is true, we have to make do with what we have got and where we can make the greatest impact. By focusing on efficiencies of energy systems and the capture of emissions, the refining industry has integrated measures to achieve decarbonisation and set itself on the road to net-zero.