This initiative marks an implicit recognition of the key role that these fuels have to play in facilitating the energy transition to net zero by 2050. The particular areas of concern and attention will be ground transport, especially the HGV sector, aviation and shipping.
One of the most pressing challenges for the oil distribution sector – which is being actively pursued by both UKIFDA and OFTEC – is to make the case for a sustainable low carbon liquid fuel in the domestic heating sector as a legitimate policy option that can support the transition, on the basis that it is a tried and tested technological solution.
With the foregoing in mind, we will now consider, in detail, three liquid fuels that are seen to have an important role to play. These are:
- Renewable diesel (HVO)
- Sustainable aviation fuel
- Synthetic or E fuels.
Apart from their contribution to GHG emissions reduction, these products share a common and highly beneficial feature. That is that they are classified as ‘drop-in’ fuels, so can be readily delivered through existing logistics infrastructures. As such, this feature greatly facilitates their quick and easy adoption with minimal additional capital outlay and disturbance.
Future Fuels
We will now look at the three future fuels in turn.
Renewable diesel / hydrotreated vegetable oil
This product is made by hydrogenation and hydrocracking of vegetable oils and animal fats using hydrogen and catalysts at high temperatures and pressures. In this hydrotreating process, oxygen is removed from the feedstocks, comprising triglycerides and/or fatty acids. The resulting products consist of straight-chained paraffins with varying properties and molecular size, depending on the feedstock characteristics and process conditions. The conversion usually takes place in two stages: hydrotreatment followed by hydrocracking/isomerization. The hydrotreatment typically takes place between 300 – 390°C. This is the most commonly used process for making HVO and is known as HEFA – hydro-processed esters and fatty acids.
This process closely resembles that for petroleum diesel and, as a result:
1. Because it’s hydrogenated, it doesn’t contain oxygen and therefore it does not present the issues of FAME biodiesel relating to freezing temperature (CFPP @ -40°C) and storage stability (due to oxidation).
2. The hydrogenation process results in it burning cleaner than FAME biodiesel (Cetane No. @ 70+ vs. 51-65).
3. Because it has the same chemical structure as petroleum diesel, it can be used in engines that are designed to run on petroleum diesel — with no blending required.
Data (from Statista) indicated global HVO capacity at just over 7 mln mt at the beginning of 2021, of which half is located in Europe. Neste of Finland, with two plants in Finland and one each in Rotterdam and Singapore, is by far the largest producer, at circa 3.3 mln mt, with plans to expand production to 6.8 mln mt by the end of 2026.
An analysis by French biodiesel broker, Greenea, projects global HVO capacity expanding to just under 30mln mt by 2025, with material growth occurring in both Europe (from 3.5 mln mt to 11.3 mln mt) and North America (from 1.9 mln mt to 12.6 mln mt).
There are three principal categories of production facility:
- Bespoke / standalone ‘greenfield’ plants which are established and dedicated to HVO production
- Former oil refineries converted into bio-refineries. Total has converted two former petroleum facilities in France to bio-refining facilities, as has ENI in Italy and Phillips 66 in California.
- Co-processing at existing oil refineries, where renewable fuels are processed through an existing HDS unit, with the only additional infrastructure required being that to accommodate feedstocks, such as UCO. In the UK, the Phillips 66 Humber refinery started co-processing in 2017, at 50,000mt/ year, subsequently expanded to 150,000 mt/year, with further expansion to 250,000mt/year in 2024.
The diagram top right of the next page is a greatly simplified/pared back schema of co-processing (this needs to be removed/changed).
As it is the quickest and most cost-effective way of establishing a presence in the renewable fuels sector, there are likely to be several more oil refineries, in both Europe and North America, which will opt for the co- processing route, such as Total in France (with excess petroleum refining capacity) and Nerefco (BP) in Rotterdam.
Typically, HVO has been found to yield GHG savings vs. petroleum alternatives of somewhere around 80-90% – a material reduction! The biggest conundrums to be addressed are around (a) long-term feedstock and hydrogen availability, (b) how quickly production can be scaled up and (c), as a consequence of (a) and (b), the price of the finished product.
The above GHG savings have been evidenced in trials as a heating fuel, where it could be an ideal drop-in, low carbon liquid replacement for kerosene. The extent of its wider adoption will depend on Government policy direction, which currently strongly favours heat pumps. Hopefully, a measure of clarity will emerge from its ‘Low Carbon Fuels Strategy’ which is due to be unveiled later in the year.
It also goes without saying that there will be competing demands for HVO both from ground transport and, especially, from aviation.
Sustainable aviation fuel (SAF)
SAF is most commonly produced from the HEFA process, already described, with an additional catalyst and cracking to yield a lighter fraction (cf. renewable diesel).
In June, the European Commission proposed a timeline for SAF to constitute a certain amount of all fuel uplifted at European airports:. The percentage was set at 2% by 2025, 6% by 2030, 32% by 2040, and 63% by 2050. This includes sub-targets for e-fuels starting at 0.7% in 2030 and reaching 28% by 2050.
There are also now individual country mandates in place e.g. Spain for 2% in 2025, Norway at 1% since 2020, with the intention to increase to 30% in 2030 and Sweden, which has a domestic flights obligation at 0.8% rising to 27% by 2030.
The UK’s net zero strategy for aviation, unveiled in July, commits UK domestic aviation to achieving net zero emissions by 2040, and for all airports in England to be zero emission by the same year. It also includes a plan for the industry to stay below pre-pandemic levels of carbon emissions through measures focused on everything from delivering system efficiencies to new technologies, with progress monitored annually.
There will also be increasing support for SAF by creating secure and growing demand through a mandate that will require at least 10% of jet fuel to be made from sustainable sources by 2030. To kickstart a domestic SAF industry, support will be provided from a new £165mn Advanced Fuels Fund. Further, the aviation industry will be challenged to deliver the first transatlantic flight running on 100% SAF in 2023.
It’s no surprise that the Scandinavian refiners, Neste and Preem, are in the vanguard of SAF production. Neste is the market leader and expects to produce 1 million mt this year, rising to 1.5 million mt in 2023. Quantities are already sold to customers in Sweden and France through a partnership with Air BP. In addition, Lufthansa and KLM use the Neste product, blended 50/50 with Jet A-1, on flights departing from Frankfurt and Schiphol Airports. The company has entered into a strategic partnership with Avfuel Corporation in the United States to create an efficient, secure supply of SAF.
Preem will produce renewable aviation fuel for SAS, to replace current Jet A-1 volumes for domestic routes in Scandinavia by 2030. The production unit, at the company’s Gothenburg oil refinery, is expected to start up by end 2022, with an annual SAF capacity of circa 250,000 mt.
In the UK, Phillips 66 has entered into an agreement with BA to supply SAF from its Humber refinery into the Exolum (CLH) pipeline, commencing earlier this year.
Currently, SAF can only be blended to a 50/50 maximum ratio with Jet A-1. That notwithstanding, scaling up will be the biggest challenge, given a total global requirement (pre-pandemic) of circa 350 million mt of Jet A-1, of which circa 60% is for long-haul journeys, for which there is no near-term propulsion alternative to the turbofan engine!
E-Fuels/Synthetic Fuels
E-Fuels are produced with electricity from renewable energy sources and electrolysis (water) to produce hydrogen, which is combined with carbon dioxide that has been extracted from industrial emissions or, from the air. Consequently, they are deemed to be carbon neutral. As they are technically compatible with their fossil fuel counterparts, they can power ICEs, jet engines and ships.
The same applies to all heating systems that use liquid and gaseous fuels. Existing transport, distribution and fuel/gas infrastructures can also continue to be used.
German motor manufacturer, Porsche, is a leading light in the promotion of e-fuels and, in collaboration with Siemens, plans to establish a plant in Chile with a production target of 55 million litres a year by 2024, and 550 million litres by 2026. Porsche says it’s planning to use the fuel in motorsports, at Porsche Experience Centres and in its production cars.
Repsol is planning to develop one of the world’s largest e-fuel plants in Spain, using, as feedstocks, CO2 from its Bilbao refinery and green hydrogen from a new plant powered entirely by renewables, to produce a range of e-fuels that can be used in cars, trucks, aviation, etc. The facility is expected to be fully operational sometime in 2024.
It remains to be seen if sufficient scale can be achieved to reduce production costs to a level that competes with conventional fossil fuels. The current gap is assessed to be around 75%, so there’s a long way to go! Also, to become mainstream, there needs to be an assured availability of renewable energy (electricity) on a cost-effective tariff.
A critical role to play
Given that cost will be a key factor, there is still a big question mark over how broadly and how rapidly these future fuels are adopted. This, in turn, gives rise to the classic ‘chicken & egg’ scenario – increased scale contributes to reduced cost and reduced cost contributes to increased scale…
Government policy has a critical part to play, in how, or if, they seek to promote the adoption of low carbon liquid fuels and their perceived role in facilitating and expediting the energy transition. Regardless, they surely have an essential role as one of the components in the suite of solutions to support this facilitation.
Hopefully, the ‘Low Carbon Fuels Strategy’ will help to provide direction and clarity. Both are very much needed!
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 position in both retail and wholesale fuels businesses. Rod draws on his extensive knowledge of this global industry to bring us ‘Industry Insights’.
