February 2019


Viewpoint: European refining 2050: Turning the vision into reality

Europe’s refiners, through their industry organization Fuels Europe, have set out their long-term ambitions in a new program called Vision 2050.

George, S., KBC Advanced Technologies, Inc.

Europe’s refiners, through their industry organization Fuels Europe, have set out their long-term ambitions in a new program called Vision 2050. The outlook sees Europe’s refiners staking a claim to remain at the center of transport fuels supply, the petrochemicals industry, renewable fuels and energy—even as Europe’s Energy Union strategy mobilizes a low-carbon, sustainable energy transition.

While Europe does not speak for the rest of the world, its aspirations for greenhouse gas (GHG) reduction, technology leadership and renewables focus will help define the global direction of travel in the decades ahead. Just as European standards for higher fuel quality have spread throughout much of the world, Europe’s future embrace of green technologies and sustainable practices will drive energy efficiency and emissions reduction to help the world achieve its commitments under the 2015 Paris climate change agreement (COP21).

Vision 2050 starts with the premise that Europe and the world will continue to rely on liquid transport fuels for the foreseeable future. Electric and hybrid cars—alternatively fueled vehicles (AFVs)—will play a role in private transport, but they cannot meet the needs of the entire transportation sector, much of which will continue to rely on liquid fuels.

What does this mean for the refining industry?

This longer-term dependence on refined products is not a radical view. The International Energy Agency’s (IEA) 2017 World Energy Outlook ‘current policy scenario’ also anticipates a world where oil demand continues to grow for at least another two decades, as population growth and economic development outpace efficiency gains, the uptake of AFVs and other new technology.

If Europe is not ready to part with fossil fuels, Vision 2050 suggests that these fuels can be made greener by introducing more renewable material into the mix, and by using renewable energy to produce and distribute them. By lowering the fossil-fuel density of these fuels, a broader and more immediate impact on CO2 emissions can be realized than waiting on new AFV technology to mature and propagate around the world, which will take decades.

The vision also calls for the EU to maintain technological leadership in this area. New process technologies and digitalization will develop and sustain highly skilled jobs in many sectors across the EU. Vision 2050 asks for a technology-neutral playing field, letting economics separate winners and losers so long as results are achieved.

New technologies will shape the future

Europe’s refiners are quick to agree that there are no ‘silver bullet’ technologies that will deliver all the benefits in one package. It is not that simple. Rather, a broad framework of technologies in the refinery setting will be managed at an asset-specific level to deliver significant GHG reductions. New technologies, such as green hydrogen, which incorporates renewable hydrogen into conventional transport fuels, are useful in upgrading technologies to continue the trend away from heavy fuel oil use and to remove more pollutant sulfur from the fuel mix. In addition, renewable refinery fuel could see refiners using more renewable electricity and biogas instead of fossil hydrocarbons to power refining processes. The refinery of 2050 could be fueled solely by renewable energy.

A role remains for increasing biofuels in the transport fuel mix, as well. As technology continues to evolve, sustainability, land use challenges and the food-vs.-fuel debate will be resolved. Drop-in versions of next-generation biofuels from waste, agricultural byproducts and algae sources will become more commonplace. Petrochemicals will also be transformed by renewable feedstocks, plastic recycling technology and a broader embrace of the circular economy.

Developments in new engine technology will also drive demand for higher-quality transport fuels. Technology improvements in cars and in traffic management are also expected to improve vehicle efficiency, delivering more personal mobility with lower GHG emissions.

Digitalization will drive continued efficiencies in energy optimization, workforce upskilling and plant reliability. Some of these technologies are in their infancy but will start delivering real benefits through improvements in predictive maintenance, reduced downtime, operating cost reduction, stable operations and on-spec products, achieving maximum economic value from capital investment.

Alongside evolving AFV use and the development of other renewable energy, these new technologies are expected to lower Europe’s share of global carbon emissions from around 10% to approximately 6% by 2050, with a long-term aspiration of completely decarbonizing Europe’s energy needs and exporting these technologies to the rest of the world.

Preparing for the future

Vision 2050 is a roadmap for a viable future for Europe’s refineries, but it is not a simple way forward. The vision is ambitious; yet, it is vital to Europe’s energy independence, the environment and the economy. Delivered successfully, these will become a benchmark for refiners in many other markets.

Refiners should be well positioned to manage the complex and expensive challenges required by the energy transition. If the EU comes to the table and fosters the investment and regulatory climate needed to stay the course, Europe’s refiners will need to rise to that challenge and deliver the vision. This will require strategic insight, capital investment, technological evolution, organizational maturity and operational excellence (OE).

Turning Vision 2050 into reality

Refiners need to invest in robust technology solutions. Adopting an OE framework integrates strategy, business processes, people and technology to address business, asset, organization and applied technology challenges. OE solutions are focused on delivering continuous improvement and sustainable competitive advantage through a program of discovering, delivering and sustaining operational benefits in all key areas of management control.

Conducting a pre-investment analysis of new technology to ensure the new investment choices are robust and resilient will help manage the risks from adopting new technology. It may also identify if any synergies can be realized with existing technologies. It is worth considering simulation software to simulate the impact of adopting new technologies and unconventional feedstocks on refinery yield and financial performance.

Refiners must also ensure that they are digitalization-ready. Refiners should not just look at the new technologies they are putting in place, but also their employees and their capability to cope with these new developments. The application of new digital technologies will change the way the organization is managed, from remote control centers to operations, maintenance and contractor management. It is important to help guide the transition by delivering change management targeted at frontline employees to ensure that they retain the right capabilities and develop the necessary future skills.

Translating Vision 2050 into practice will require Europe’s refiners to rethink and rebuild their long-term strategies, along the way transforming their organizations into modern, flexible, knowledge-based enterprises. HP

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