It remains to be seen if any of the refineries follow the co-processing precedent set by the Phillips 66 Humber plant , with a renewable diesel unit since 2018 now with a capacity of 150,000 mt / year , with plans to expand to 250,000 mt in 2024 . In mainland Europe both Total in France and ENI in Italy have gone a step further by conversion of former oil refineries in to 100 % biofuels facilities- two in each case . Will these precedents be followed by any of the UK refiners ?
The clear balance of probability is that the refinery network will be smaller by 2030 ; factors such as security of supply and supply resilience will also be important determinants of the size and shape of the network come 2030 .
Ground transport fuels : Sales of these grades ( diesel , petrol & gasoil ) represent 60 % of total inland refined product deliveries , so are the bread and butter for the participants in the downstream oil sector . The past year , in particular , has seen a rapid pick-up in EV sales and this trend is expected to accelerate , with increasing attention and encouragement from government . Mindful of the more ambitious 2030 GHG emissions reduction target ( -78 % vs 1990 ) and the ban on ICE vehicle sales from that date this prompts two critical questions :
1 . To what extent will the current filling station network , currently numbering 8,386 outlets , shrink in the face of declining petrol & diesel usage ?
2 . How many mid-size refiners and fuel re-sellers / wholesalers can be accommodated by a reduced market for the three ground transport fuels ? The answers ( outcomes ) to the above questions will be key to shaping the kind of competitive landscape in 2030 . Directionally , there are likely to be fewer players and , maybe , some different / new ones from the wider energy or other sectors ?
Of the existing participants , both BP and Shell have served notice of intentions regarding the electrification of transport , with ambitious plans around EV charging facilities across their networks . Further , BP acquired the UK ’ s largest electric vehicle charging company , Chargemaster , in 2018 , whose Polar network comprises circa 7,000 publicly available charging points . Shell acquired Dutch company , NewMotion in 2017 , one of Europe ’ s largest electric vehicle charging companies which provides circa 30,000 residential and business charging points and 50,000 public sites . The country ’ s largest independent dealer group , MFG , plans to invest £ 400 million to install around 3,000 ultra-rapid 150kW and 350kW EV chargers at roughly 500 sites by the end of 2030 .
Aviation fuel : Full recovery from the 60 % collapse in demand last year is not expected to occur until around 2024- and it may never get back to 2019 levels if long-haul traffic does not recover to prior levels . Notwithstanding that decline , aviation is viewed as one of the most difficult sectors to de-carbonise , at least in the short to medium term . There is rising interest , and activity , around the production of sustainable aviation fuel ( SAF ), based on HVO , but the scale and general availability will remain limited for the foreseeable future .
Consequently , the competitive landscape is unlikely to experience any material change over the next ten or so years , with the existing dominant market players ( BP , Esso , Shell ) continuing to be so .
Heating oil : In its ‘ Future Vision ’, published in July 2019 , UKPIA declared a commitment to cease supply of heating oil to properties off the gas grid during the 2020s , when use of liquid fuels for space heating will fall to ‘ very low levels ’. The Association does not envisage that a sustainable low carbon liquid fuel will have a future role in the energy supply system outside of the transport sector ( ground transport , as well as aviation and maritime sectors ).
Implementation of this commitment infers that an important part of the oil distributor ’ s business portfolio will not exist in its current form by 2030 , although there may be a place , albeit very limited , for a drop-in low carbon liquid fuel alternative , such as HVO .
The knock-on impact of the foregoing on the competitive landscape is very difficult to gauge at this juncture . Suffice it to say that , directionally , it will drive greater consolidation .
LPG : The principal outlet for LPG , accounting for around two thirds of demand , is as a petrochemical feed stock for steam cracking to produce olefins- ethylene , propylene and butadiene- which are key building blocks for the chemicals industry . This is the one market for refined oil products which , it is envisaged , will enjoy longer term sustainability than the more ‘ mainstream ’ ones , although there is a potential threat from increased availability of ethane sourced out of US shale gas production .
Trying to speculate about the precise shape of the UK downstream oil sector landscape in circa 2030 is largely a ‘ guesswork ’ exercise so , in the foregoing narrative we ’ ve tried to identify and highlight some key pointers . In all probability it will not look too much different from that today- though maybe with fewer participants among those currently involved , but with the possibility of new / different players from elsewhere in the energy sector , or beyond ?
Time and evolving circumstances will tell !
ROD PROWSE , worked for 30 years across the full spectrum of the downstream oil sector , in both the UK and USA , which has included leadership positions in both retail and wholesale fuels businesses . Rod draws on his extensive knowledge of this global industry to bring us ‘ Industry Insights ’.
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