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UKPIA on downstream role
ON THE MOVE
DOWNSTREAM • THE TRANSITION TO A CARBON-NEUTRAL SOCIETY LEAVES PLENTY OF SCOPE FOR OIL REFINERS AND DISTRIBUTORS TO MAKE A CONTRIBUTION, UKPIA SAYS
THE UK PETROLEUM Industry Association (UKPIA) has released a new report, Transition, Transformation, and Innovation: Our role in the Net-Zero Challenge, that looks closely at the role the UK downstream oil sector can play – and is already playing - in meeting societal targets for decarbonisation. The report looks at some credible scenarios and proposes an illustrative pathway for the sector to help achieve government-mandated net-zero targets; it also offers some practical policy solutions to help industry overcome the challenges that those targets present. The report provides three key findings: 1. Low-carbon liquid fuels can play a key role in the UK’s decarbonisation process - and are already beginning to do so. 2. Hydrogen is a critical component of meeting net-zero targets. The downstream sector is the largest producer of hydrogen in the world and can maintain and grow its role in producing and delivering zero-carbon emitting hydrogen. 3. A systems-based approach and enabling policy framework are required to produce low carbon and eventually net-zero liquid fuels. As part of this, bespoke approaches must be considered for sectors such as aviation that have limited decarbonisation options.
“This is an exciting yet challenging period of evolution for the downstream oil sector,” says Stephen Marcos Jones, director-general of UKPIA. “We are committed to action on climate change and this report shows that, within the right policy framework, this sector can transform and deliver Net-Zero.
“Only with industry and government working hand-in-hand in a systems-based approach will the task of Net-Zero be achieved in the UK. As such, this report urges ongoing and rigorous dialogue to ensure optimal results. We want to work now across government to make this report a reality.”
LIQUIDS WILL LAST The report is based on the assumption that liquid fuels – albeit of a low-carbon variety – will remain the fuel of choice for transport purposes. In this regard, the report seeks to persuade decision-makers that the UK’s oil refining, distribution and marketing sector still has a role to play in a net-zero world and is, in effect, a plea for the sector’s continued existence. That assumption is not so outrageous: the rate of uptake of electric and hybrid vehicles is not fast enough to generate the level of emissions reduction that is required and, in any case, the supply infrastructure is still lacking. Liquid fuels, even of a bio- or e-variety, can use the existing supply network.
As the UKPIA report says: “The downstream oil sector continues to evolve and is already contributing significant emissions reductions whether it be through delivery of biofuels or by reducing emissions in the manufacturing process. Multiple technological means exist to reduce manufacturing processes’ emissions to zero and deliver liquid fuels that have significantly lower carbon emissions across their lifecycle, which could be delivered at scale under the right economic framework.”
As well as being able to deliver low-carbon liquid fuels to help decarbonise the transport sector, UKPIA’s members, the Association says, have the potential to play a role in decarbonising other sectors, through industrial clustering, making better use of waste heat, and contributing its extensive experience of managing hydrogen to help in the development of the UK’s nascent hydrogen economy.
To do this, UKPISA says, there is a need for ‘joined-up government’ and collaboration between government and the industry, in order to deliver the policy framework that will enable businesses to undertake the necessary transformation. “The downstream sector is
well-established with a history of delivering major projects with its highly skilled workforce, but such is the ambition in reaching the Net-Zero target that it cannot be done alone,” the report states.
NEEDED FROM GOVERNMENT The UKPIA report includes some key recommendations for that policy framework.
Firstly, government needs to help stimulate early demand for low-carbon liquid fuels and hydrogen in the transport sector, while also ensuring that consumers are informed about their role in the decarbonisation transition.
Standards and emissions labels for vehicles should be revised to show their lifecycle emissions, not just tailpipe emissions. The government must work with industry to develop sector-specific plans to decarbonise those sectors with limited decarbonisation options.
The UK needs a hydrogen strategy that sets out policy, regulatory and preferred business frameworks, giving clarity about how supply and demand can be grown together. The UK’s business environment needs to be adjusted to position the country as a first choice for investment in the technology required and to enable companies to compete in the global market. Similarly, the government should provide support for research, development and deployment of decarbonisation technologies, ensuring that they align with company needs. It should also continue to promote industrial clusters with the downstream oil sector at their centre, and prepare the national workforce to delivery Net-Zero in a “just transition”. This will all require a regulatory framework that allows for innovation.
HYDROGEN ACTIVITY Interestingly, the UKPIA report focuses very much on the potential for hydrogen to contribute strongly to reaching Net-Zero in the downstream sector, with an important role to play in replacing refinery fuel gas as a source of energy. It can also be sold on for transport or heating use. “In this sense, there is a strong investment case for hydrogen production,” it says.
Until recently, the production of hydrogen by electrolysis had not been thought scalable for large-scale applications. UKPIA highlights two current projects that seek to overturn that consensus. Firstly, ITM Power Trading, in collaboration with Ørsted, Phillips 66 and Element Energy, is progressing with the ‘Gigastack’ project on the east coast of England, which will use ITM’s polymer electrolyte membrane technology and renewable electricity from Ørsted’s offshore wind farms to deliver renewable hydrogen to the Phillips 66 refinery. A first phase has already been completed and funding has been secured for a second phase, which aims to scale up production. “A key objective of the Gigastack project is to identify and highlight regulatory, commercial and technical challenges for real applications of industrialscale renewable hydrogen systems,” says Ørsted.
The second project is the HyNet lowcarbon hydrogen (LCH) development, to be situated near Essar Oil’s refinery at Stanlow in north-west England. It will use Johnson Matthey’s LCH technology, which includes carbon capture, and will use refinery fuel gas as a feedstock. A first plant will supply hydrogen as a substitute for existing refinery fuels, while a hydrogen-fired combined heat and power (CHP) plant is also under consideration. The UKPIA report, Transition, Transformation and Innovation, can be downloaded from the Association’s website at https://ukpia.com/ media-centre/publications/.
THE DOWNSTREAM SECTOR IS ALREADY CONTRIBUTING
TO DECARBONISATION, THROUGH THE MANUFACTURE
AND DISTRIBUTION OF BIOFUELS AND INVESTIGATION
