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The UK had 18 refineries, it now has 8. Fuel Oil News recently put a series of questions about the state of the country’s refining industry to Chris Hunt, director general of the United Kingdom Petroleum Industry Association (UKPIA)
“The reduction in the number of UK refineries is very much progress driven and, reaction to changing market demand,” said Chris. “Refinery capacity has increased due to technological advances. Yes, the UK has fewer plants but the ones remaining are more efficient.“Plus, an inevitable consequence of the UK and EU drive for energy efficiency is demand destruction. With more efficient engines, demand for refinery products such as petrol continues to decrease but, until the recent recession this has been offset to a large degree by increased consumer mileage.“On the other hand, being more efficient in our oil consumption is a good way to achieve our carbon reduction without sacrificing our mobility. It also helps conserve supplies of this finite resource.”
In with the new As most majors have retreated from downstream, new players have entered the refining arena. “We welcome these newcomers, they’ve brought a fresh dynamic to UKPIA,” said Chris. “Whilst they don’t have the deep pockets of the integrated oil majors, their flat command and control structure offers a different business model.Q: So what do investors like Petrochina, Essar and Valero have to gain in our mature industry?
“A very handy toehold in Europe,” says Chris. “In Stanlow and Pembroke, Essar and Valero respectively, have acquired good assets relative to European standards. At Grangemouth, Petrochina and INEOS are using the site to develop an impressive chemicals portfolio.”
A large refinery reputedly contributes £60 million to the local economy. “Closed in 2009, Petroplus’ Teesside refinery was an ex-ICI plant, very simple in refinery complexity terms but closely integrated with petrochemical activities. The loss of that critical mass, and the associated high value jobs at these plants, has had a big impact on an area of the UK which can ill afford such a hit.”
Q: So will the UK ever see a new refinery?
“It would be difficult to see a case for building a new refinery – capacity wise we just don’t need it. But, under the right conditions and, with the right incentives, investment could be made at the remaining facilities.”
Q: What are the right conditions?
“They will be when the vital contribution of the UK’s oil industry to our energy security is fully recognised. It also requires a level playing field where UK refineries are not disadvantaged against European or global competitors.
Q: Will there ever be a level playing field?
“There could be,” said Chris. “It could be achieved if the UK and EU recognise that we can’t go it alone on some aspects of environmental policy. We may be world leaders in climate change policy but we must also consider the cost to our manufacturers.”
Coming soon – a refining strategy for the UK and a stock holding agency
In his introduction to UKPIA’s report on Fuelling the UK’s future: the role of our refining and downstream oil industry published in November 2011, Brian Worrall, then UKPIA president, said: “Given the right policy environment, the UK refining and downstream oil sector can continue to play a pivotal role.
KPIA and its members look forward to continuing to work with government and policy makers to achieve this goal.
Q: So, how receptive is the UK government to the oil refining industry?
“Very receptive,” reports Chris. “We’re finally moving forward on a proper refinery strategy for the UK which will be published in the third quarter of this year. We started lobbying in spring 2011 so this is quite a step forward.
“We also have a green light to progress an independent industry-funded agency to manage the UK’s compulsory oil stock holding. Administered by a board via obligated companies, the agency is expected to be functioning by 2014.”
Q: Does UKPIA now believe the government will apply policies that do not place the UK at a commercial disadvantage?
“We certainly hope so,” said Chris. “We expect that the refinery strategy exercise will lead the government to this conclusion. The problems at Coryton really galvanised the government into action – it provided clear evidence that refineries can and do shut; although in the case of Coryton, we very much hope a buyer will be found.
“For years, UKPIA has been saying that refineries could shut but, it took the demise of Petroplus to move refining up the political agenda. It reminds me of Spike Milligan’s epitaph – I told you I was ill.”
More challenges in the pipeline
Marine fuel – “Imminent changes in the specification of marine fuels will have a big impact. Under MARPOL proposals, the 2020 specification will see sulphur levels move closer to that of diesel. The effect on both the refining process and bunkering will be colossal. A substantial price increase may see ship owners chose the cheaper option of onboard scrubbing of exhaust gases to remove sulphur.
“Even by 2035, the International Energy Agency expects 80% of EU transport fuel demand to still be met from oil derivatives with most demand met by ordinary fuels particularly for the aviation and marine sectors,” added Chris.
Biofuels – UKPIA’s communications director, Nick Vandervell, who was also present at the interview, told FON: “Most biofuels currently used are first generation with complex sustainability issues in some cases. Second generation biofuels from biomass or advanced biofuels from algae for example, may have potential in the future.
“We see a more diverse fuel mix for transport including electric vehicles,” added Nick. “Technology favours hybrids unless there’s a breakthrough in battery technology in the short term.”
Q: Will we achieve 10% biofuels by 2020?
“Biofuels bring many issues, such as approval by vehicle manufacturers, storage and use and sustainability” replied Chris. “It’s likely that only by incentive – make the price the same or even cheaper – that people will switch to higher blend biodiesel.“
Kerosene – “Relative to the grand scheme of things, heating kerosene is a tiny market,” says Chris. “It’s very much a commercial issue. Distributors are not willing to invest in storage – an expensive asset for such a seasonal product. Demand patterns are difficult to predict, supplies can be problematic particularly in times of severe weather when supplies can be drawn down rapidly. Co-operative buying could be a way forward or maybe we need to switch to gas oil….?
The future
Q: Does UKPIA expect further UK refinery closures?
“No, we don’t expect more closures. As the reality of future supply problems has started to bite, UKPIA doesn’t believe that Europe will give up on refining.
“Total retaining the Lindsey refinery for the foreseeable future was welcome news as this plant has had the most recent major investment to increase diesel output.”
Q: Will the UK become just a storage facility?
“I can only contemplate the UK relying on more imported product if we lose the existing refinery structure. And, I cannot conceive that a government of any colour would allow this to happen.
“Some say that the UK could be supplied by imports, but that wouldn’t last forever. Being reliant on supply at the end of a long chain is problematic. Plus, bringing in finished product comes with shipping, jetty and pilot issues.
“The government, the industry and the country needs to ask the question – would we be happy being at the end of a supply chain from challenged areas of the world?
Q: What is the prospect for a ‘healthy, robust oil refining industry’ in the UK?
“We’ve got to be optimistic; we absolutely believe that a healthy, robust oil refining industry is achievable.”
FON recently reported on a Shropshire-based charity that had secured a government grant to help people join a fuel-buying scheme. The £3000 grant is being used to make the scheme available to people who would otherwise be unable to pay for membership
The above group is just one of a growing number of community schemes across the country. And it’s not just in oil that such schemes are spreading…
The Big Switch campaign, a collaboration between Which? and pressure group, 38 Degrees, already has more than 60,000 participants. The ‘trailblazing scheme’ offers energy customers the opportunity to club together to secure optimum prices from energy suppliers. Group-buying firms, Incahoot and Utility Warehouse also offer discounts on energy.
In Oxfordshire, an organic farmer is encouraging community ownership of renewable energy projects. In 2004, Adam Twine, gave locals the opportunity to own shares in the wind farm on his land. Eight years on, he is offering the local community ₤4.5m shares in a new 30-acre solar project.
Back to oil, The Times recently reported on a free website which is taking the idea of community buying onto a national level. www.oil-club.co.uk, which was founded by Chris Brown, combines smaller purchasers into one big body.
Distributor views
Although popular with consumers, community fuel buying groups are not viewed favourably by all distributors. Tony Deakins, of Shropshire based Deakins Fuels, told FON: “I’m very much against such schemes. I don’t supply any buying groups, as the majority of deliveries involved tend to be minimum delivery (500 litres) and are often not straightforward. Most of our customers seem to value our level of service and realise that another tier of ordering – for a minimal saving – simply removes them from any close relationship they may have with their distributor.”
Shropshire distributor, Oakleys Fuel Oils is not totally against buying groups, but does have some reservations. “There’s nothing wrong in principle if a group consists of a few houses and involves a sensible size load. One tanker delivering to a small, close-knit community is a sensible option for both parties. When groups start to spread county-wide, deliveries are scattered and the members want the oil unrealistically cheap, then it simply doesn’t work.”
Talking about the aforementioned Shropshire scheme in particular, Richard says he was shocked that Oakley’s, as one of the county’s biggest distributors, was not asked to supply the group. He also thinks that distributors are inadvertently giving buying groups more leverage by quoting inflated prices when they are not interested in supplying, rather than simply declining. When the group is eventually quoted a more realistic rate, it will then claim to have delivered its members a large saving.
Richard makes the point that the industry should have a format to adhere to when dealing with buying groups. He also questions: “What do the group organisers get out of these schemes? A lot of these groups are run as businesses. Are they in fact taking a wage? Why don’t they just make an honest living out of it and buy a tanker themselves?” This is a sentiment echoed by Tony Deakins, who also questioned the role of group co-ordinators.
Hingley and Callow director, Helen Needham, made her feelings on the subject quite clear: “Community buying groups – now there’s a topic! The bane of our life! And, which bit of community buying allows the organiser to take more of a margin than us the supplier?! I had one the other day wanting to take 4ppl!”
Mark Askew, chief executive of the Federation of Petroleum Suppliers was recently quoted in The Times as saying: “Small, local buying groups in a neighbourhood can benefit from the saving the distributor makes on travel time and costs. However, size is not always a benefit when purchasing oil through buying groups. People should be realistic about the level of savings.”
Oxfordshire initiatives
In a bid to save money and make their village a cleaner and safer place to live, residents of West Challow, Oxfordshire, operate an oil buying group. Local distributor, Sweet Fuels, has been supplying the group for three years, and also supplies a number of others in the area. Owner, Adrian Sweet said: “We supply about 20 groups in total. For the majority of these groups, we deliver once a week, offering members a discount off the ring round price. It works really well. However, we don’t supply the larger buying groups who routinely contact at least 10 companies to negotiate the cheapest price.”
According to a recent article in the Banbury Cake, residents across Oxfordshire are benefiting from the roll-out of a scheme, which has already saved thousands of pounds. The scheme, which was originally launched in 2010 by Oxfordshire Rural Community Council (ORCC) and Chris Pomfret of Community Buying unlimited, has saved householders a reported £71,151. The initiative, which requires residents to pay an annual fee of £20 and place their order through a local co-ordinator, has now been rolled out in 19 of Oxfordshire’s 37 Rural Community Partnerships.
Peart partners housing association
In North Yorkshire, F. Peart & Co has partnered with Broadacres Housing Association, offering an oil scheme to help residents take control of their energy bills. Broadacres Housing Association, which provides a range of services to over 5200 homes, sought a solution for its tenants, who sometimes find it difficult to purchase heating oil in bulk.
“We were concerned that a number of our residents were living in fuel poverty and couldn’t afford the cost of their oil upfront, so we decided to set up a contract with an oil distributor to resolve this issue,” explained a company representative.
As part of the scheme, residents are not required to pay any bills at the time of delivery and instead a direct debit is set up with the housing association, which then pays F. Peart & Co direct. Laura Jackson, business manager at the company, said: “Paying by direct debit is the safest and simplest method of payment and gives the tenant peace of mind that they’ve paid on time. A regular monthly payment also makes it easier for customers to budget for their heating oil.”
Since its launch, 154 residents have joined and are now benefitting from the initiative.
New products from TankCare UK (an OTS Group company) include TankStream, a fuel quality and wetstock monitoring system for dispersed fuel storage installations.
Designed to provide real time updates, the system works in conjunction with an integral fuel conditioning system which recirculates and treats the wetstock to prevent microbial growth contamination.
“With higher content biofuels having resulted in greater amounts of water in suspension, fuel quality can very quickly deteriorate if not treated immediately,” says OTS sales director, Steve Gain. “Fleet managers want a more intelligent approach; TankStream allows them not only to check fuel stock availability, but also the fuel’s condition.”
TankStream’s instrumentation will monitor up to eight tanks and eight sensor packs. Tank contents are polled every 20 seconds and the data is automatically uploaded to the internet.
Real time stocks and alarms can be relayed by email and the situation reports streamed to any web browser, either mobile or at any geographic location with internet access. The system can also be scaled up to incorporate the smart control of pumps sets with the ability to reset fuel dispensers remotely via the web.
www.tankcare.eu.com
Kingspan Environmental’s SonicSignalman electronic oil-level monitoring system now has a NEW SMS feature, allowing oil companies to send text messages to end-users. The SonicSignalman is a onepart device that uses the latest ultrasonic and GSM technology to remotely monitor the level of oil in a customer’s tank. The new text message facility will enable oil companies to send updates to customers about promotions and planned delivery runs. Messages can be broadcast to all customers or sent to those in specific geographical locations. The information received back can be used to improve logistics, reducing the number of wasted deliveries and spreading periods of peak demand.
www.sensor-systems.com
Kan’to Instruments has recently completed a major installation for Finol Oil, one of the leading lubricant suppliers in Ireland
Dimitri Papaioannou, managing director of Kan’to, told FON: “We’ve now completed the installation of an automatic tank gauging system – using our iLevel gauges and iNTELLIGENTGAUGING software The whole project was very successfully managed by our agents and distributors in Ireland, Re-Antechnology Services, with managing director, Ian Gillespie, playing a pivotal role.”
Liquid storage applications The Kan’to iLevel console was developed as a solution for inventory and alarm management in liquid storage applications. It provides delivery and inventory reports, real-time telemetry and can be accessed using a web-based interface or by computer based software. The console can monitor up to eight tanks simultaneously, and is available with a wide range of probes, providing up to +/- 1mm in accuracy.
This month Dublin-based Finol Oils is celebrating 35 years in business. “We operate 20 bulk lubricant storage tanks ranging in size from 8000 to 42,000 litres,“ said Dominick Purcell, chief executive officer. “We’re very happy with the new Kan’to system. Compared to our older system, it’s greatly assisting us with stock levels and control. RE-AN International Technology Services installed and commissioned the system in a timely and efficient manner.”
Ian Gillespie added: “Up to the installation of the Kan’to system, the company had issues that impacted on their stock control management. To address the problems, all Finol tanks were surveyed and calibrated in association with Fuelling Technology, so that we could specify a complete stock solution. By all accounts, Finol are very pleased with the stock solution provided.”
www.kanto.co.uk
Webinar with Dimitri Papaioannou: https://fuelondev.wpengine.com/2012/04/kantos-real-time-tank-gauging/
Free software updates have been introduced for Dunraven’s Apollo Smart heating oil energy monitor. “There’s nothing worse than buying technology today, only to find it’s out of date tomorrow,” said Gerry Jones. “That’s why our customers can be assured that no matter when they purchase their monitor, it can always be running the very latest device software.
“Downloading the software updates couldn’t be easier. Simply download and install the update and device drivers from the Apollo website, plug in the monitor’s USB cable to your computer and the software will be installed in minutes. Apollo Smart allows consumers to monitor heating oil consumption, fuel costs and CO2 emissions on a daily, weekly, monthly and annual basis.”
www.dunravensystems.com
Wakefield-based tanker manufacturer, Tasca Tankers is on track for further expansion after acquiring the business and assets of Maidment Tankers.
“It was with regret that we learned of the difficulties faced by Maidment Tankers, a long established family business,” said Shaun Harte. “With a steadfast reputation for quality and service in the south of England, which mirrored Tasca’s reputation in the North, it was a natural move for Tasca to acquire Maidment from the administrator.
“The intention is to continue with tanker sales, service, commercial painting and repair at the Maidment facility in Littlehampton. This should bring the well-recognised qualities, that Tasca and Paint Shop Northern are renowned for, to the existing and, hopefully new, customer base in the south of England.”
Plans are also in the pipeline to boost the Wakefield workforce by approximately 20 new recruits this year. The company will also honour its annual commitment to Wakefield College, taking on three new apprentices.
Established in 1996 and now employing 100 staff at the company’s Diamond Business Park headquarters, Tasca Tankers makes tankers for a wide range of industries. The company’s sales turnover has increased from £4.6m in 2009 to an estimated £7m last year and staff levels rose by 50-60% during the same period. Tasca’s customers include Otley-based Tate Fuel Oils, Peak Fuels from Derbyshire and GB Oils.
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IFC Inflow celebrates its 25th anniversary this year. Founded in 1987 as Industrial Flow Control Ltd, primarily to sell tanker loading and process metering equipment, the company is now run by operations manager, Kiran Shaw and technical director Greg Clarke. Both agree that 25 years in business is a real milestone and, to be still growing and developing is key to its success.
Engineering solutions
Initially IFC Inflow was a distributor of flow meters and loading arms. The company now provides total project solutions including design, fabrication and installation services along with a range of standard products direct from stock. Kiran says: “In 1987 we only sold products that were made and designed by other companies. As customers reduced their in-house engineering staff, it became apparent that we needed to offer engineering solutions, as well as standard products. We invested heavily in our own design and engineering facilities and developed equipment better suited to our customers’ needs”. Moving from a standard equipment distributor to a total solution provider – we listened to customer requirements, provided purpose-designed solutions incorporating existing products, and designed or sourced new products to match customer needs.
IFC Inflow also pioneered the use of bottom loading skids in the AD depot market. The company’s first unit was built in 1994 and since then, over 100 units have been supplied in the UK alone. IFC Inflow has also expanded into tanker loading, fuel bunkering and tanker safe access sectors.
The company has doubled in size. Its customer base has grown to over 2000 clients with many blue chip companies; export business has tripled. “Over the past 25 years we’ve gained a unique insight into the specific needs of our customers. This enables us to provide the most effective solution to any tanker loading or safe access requirement. We look forward to what the future holds,” adds Kiran.
www.inflow.co.uk
Konnect, a new range of value for money loading arms, developed to handle the safe transfer of petroleum products to and from road and rail tankers, has been launched by Emco Wheaton.
“The range delivers exceptional quality at highly affordable prices. Included are top and bottom loading arms, with all versions featuring advanced designs that are poised to change market expectations across the globe,” says Walter Spitzner, manager for distribution loading arms.
“We’ve reduced our costs considerably, without compromising quality,” added Walter. “We’ve been able to pass these savings on to our customers, but more importantly, we’ve been able to achieve much faster production targets resulting in shorter delivery times.”
Manufactured at the company’s factories in Kirchhain, Germany and Houston, USA, each product is designed to deliver the lowest possible whole life cost to provide long term value for money. This has been achieved with added value engineering and the addition of the company’s D2000 swivel joints.
Alpeco has launched its latest range of MF400 and MF800 truck metering systems. The new multifunctional two and three inch systems see the original DMX gas separator, superseded by the latest technology, LC Sound. Measuring Instruments Directive (MID) approved, the compact LC Sound mounts directly to the inlet of the LC measuring chamber and uses ultrasonic energy to continuously monitor for the presence of air or gas in the fuel being delivered. If these elements are detected, LC Sound signals the metering system to slow or momentarily stop the flow, until the air or gas has been evacuated through the inbuilt air/gas release.
www.alpeco.co.uk
There are two million off-grid homes in the UK and Ireland. Over the next 20 years, these homes will slowly but surely need to decarbonise.
Along the way, greater energy efficiency of equipment and buildings will play a vital role; alongside the probability of an increasing number of new renewable technologies working in harmony with existing oil-fired systems.
The energy behind the show
Facilitating the way into this evolving marketplace is the Oil & Renewable Energy Show. Organised by A&D Publishing – publishers of Fuel Oil News, Oil Installer, and Renewable Energy Installer – this national exhibition will be held at Manchester Central conference and exhibition complex on October 17th – 18th.
Speaking at the official launch earlier this year, the show’s commercial lead, Jonathan Hibbert, said: “This show is about oil working smarter and more efficiently alongside complementary renewable technologies such as solar PV, solar thermal, heat pumps and biomass. It’s a chance for everyone connected to the oil heating industry to broaden their knowledge; to discover and to discuss future options for off-grid domestic and commercial properties and to watch practical demonstrations which will illustrate how the technologies can work together.”
The show’s main trade association sponsor is OFTEC; director general Jeremy Hawksley said: “OFTEC was formed 21 years ago to create technical standards for the oil heating/cooking industry. Now, the 10,000 plus OFTEC-registered technicians serving this rather unique niche market, have a new mission to get the low carbon message across to their customers. The show will help oil installers find the most economic and do-able solutions to assist their customers in this transition period.”
Well-known to FON readers as a tank manufacturer, Kingspan Environmental is a main commercial sponsor. Marketing manager, Cheryl Graham, said: “We’re delighted to be associated with the Oil & Renewable Energy Show – we’ll be launching new products at the event and showcasing the complete Kingspan Environmental product portfolio of traditional and renewable technologies. We’re committed to the development of environmentally friendly products; one being rainwater harvesting, now being retrofitted in many homes and businesses.”
“With fuel prices as they are, there has never been a better time to recommend renewable technologies as the perfect partner for oil-fired boilers in off mains gas properties,” said Martyn Bridges, director of marketing and technical support for Worcester, Bosch Group. “We’re delighted to be one of the show’s key sponsors. Worcester has always been a strong advocate of combining solar thermal panels with oil-fired boilers for the energy efficient provision of hot water. Combined with the prospect of biofuels now on the horizon, those keen to introduce a renewable element to their homes have plenty of choices.”
“October’s Oil & Renewable Energy Show has already attracted huge support,” reports Jonathan Hibbert. “We’re particularly delighted to have a distinguished group of big name sponsors and exhibitors. Their support is testament to the show’s national significance.”
To find out more about the Oil & Renewable Energy Show, call the team on 01565 653283 or visit
www.oilandrenewableenergyshow.co.uk.
Roger Creswell, director of the Oil Recycling Association (ORA) writes: “Never far from the environmental scene, and despite its wide utility, oil is a word that seems to catch the attention of governments, regulators and commentators, especially when it’s lost or spilt. That seems fair and just; so it means we all have to be focused, particularly so when it comes to managing waste oil”
Obligations for producers
In 2010 the UK introduced the revised EU Waste Framework Directive (rWFD) into national legislation and this placed a number of obligations on waste producers. While all oil streams will at sometime incur a waste, in general, our reference to waste oil is essentially that of used lubricating oils, for example engine oils, and those more common fuels.
If something is discarded (and this has many legal meanings) it is a waste, even if that something is unused. Once a waste, it is to be managed under waste legislation. While offering a high degree of environmental protection, it can create barriers to subsequent reuse or recycling objectives. Waste oil has been one of those difficult areas for regulators. Having the obvious potential for use as a fuel, and recouping its energy content through combustion, then the Waste Incineration Directive (WID) would probably apply, though very few applications can conform to the rigorous emissions standards that are imposed.
In the last few years, a tremendous effort has been channelled by authorities, and the oil recovery industry, into establishing waste policies that have been translated into guidance. These have then been turned into standards, in order to achieve a position that allows for an End of Waste status to occur. All devolved regions of the UK have adopted such a standard that defines the conditions for End of Waste for used oils, in what is generally referred to as the Quality Protocol For Processed Fuel Oil.
Quality protocol
This quality protocol is usually abbreviated to the term ‘QP for PFO’. Essentially its core is a technical standard that seeks to emulate certain classes of industrial fuels, described in BS 2869. This together with certain restrictive additional parameters is designed to ensure that on combustion the fuel will be no more harmful to man or the environment than a comparative virgin fuel. It achieves this through the setting of detailed sampling and test limits/methods, and notably the use of accreditation to demonstrate compliance. There are further restrictions as to what may be incorporated into its feedstock, and on those permitted to produce a PFO, but additionally on users of the fuel.
Higher oil prices in 2010 and 2011 have formed attractive outlets for PFO. The result has been that supplies of waste oil inputs are readily sought out on a commercial basis and a potential polluting stream is economically and efficiently removed from the environment. UK markets for the historic waste oil status, Recovered Fuel Oil (RFO), are now very limited, with the consequent need to export some volumes to continental based lime kilns that are WID compliant and where duty differentials make it an attractive fuel.
Twists and turns?
The rWFD transposed legislation referred to earlier, has required waste producers to declare that they have considered the hierarchal requirements that place an option of material recycling higher than that for energy recovery. What this means, is that for used lubricating oils, can the inherent basic lubrication oil fraction it contains be recovered for reuse? – a process known as re-refining. This also says that where combustion is the selected option, it needs to be justified through Life Cycle Thinking, and that is recovery usage and not recycling, a fine point in law. The Department for Environment, Food and Rural Affairs’ Hazardous Waste Guidance was published recently. www.defra.gov.uk/environment/
waste/business/hazardous-waste
Finally, in 2011 government’s National Policy Statement on Hazardous Waste and Planning for Infrastructure, puts forward a specific policy to encourage investment in a modern high technology lubricants re-refinery. This reflects waste hierarchy policy, but substantial monies will be required from the private sector.
www.oilrecyclingassociation.co.uk
In December 2009, as the legislative framework shaping biofuels was about to change, FON reported on problems and issues affecting the industry. Two years on, we take a look at how things have changed. “Looking back at the original article, what strikes me is that in some ways biofuels have changed a lot; in some ways they’re exactly the same, “ says Mabanaft’s biofuels’ manager, Robin Lloyd
Now chairman of Climate Change Capital, Vivienne Cox, who retired from BP in 2009 after 28 years, was guest speaker in the Vital Topics series at the University of Manchester’s Business School; Fuel Oil News listened to her perspective on the energy markets
Oil and gas – mispricing risk
Although disagreeing with the peak oil theory, Vivienne sees oil’s role in the future energy mix becoming less important – especially as gas production – $54 cheaper than a barrel of oil – and backed up by new sources of shale gas, is growing. Oil still has a reserve to production ratio of around 40-50 years; most oil wells have only had 50% of their contents extracted and technology exists to extract more but – going deeper, hotter and sourer comes with risk – a risk that Vivienne says the world has been significantly mispricing.
For some time, the world has been deluding itself as to what energy should cost. With huge political risk attached to energy production, project development gets harder – low cost oil production in Libya quickly went to no cost in the Arab spring; shale extraction attracts complaints and lawsuits; the cost of Shell’s long delayed gas to liquid plant in Quatar went from $5 to $19 billion dollars; Finland’s nuclear program is 60% over budget and 5 years late. As the financial markets have already found to their cost, mispricing risk is dangerous. Vivienne also highlights public backlash as another mispriced risk.
Risk and volatility comes with oil production in Saudi Arabia, Iraq, Iran, Kuwait and Venezuela. Plus 17% of energy supplies pass through a narrow stretch of water governed by repressive dictators – can we continue to rely on energy from such sources?
As economies grow, access to energy will be demanded as a fundamental right. China accounts for 20% of global energy demand; global energy consumption has risen by 6% as a result of its CO2 intensive industries. Is it sustainable for global energy use to continue to increase?
Will there be an increasing role for renewables in the future energy mix?
As executive vice president of BP’s gas, power and renewables division, Vivienne created BP Alternative Energy to focus on solar, wind, biofuels and carbon sequestration and storage. Asked why she had created a renewable business within an oil company, she pointed out that BP is an energy company and energy is shifting. If oil companies were to be more involved, it could facilitate a shift to renewables. In a difficult investment climate, backing for sustainability is much lower and with long pay backs on projects, investors need very deep pockets.
Seven years ago, Vivienne was ‘very optimistic’ about a renewable future but although the use of renewable energy has tripled in 10 years, the sector remains very small. Even allowing for annual growth of 20% over 10 years, renewables would still only account for just 10% of our total energy mix; a figure insufficient to combat CO2 emissions. Plus, in common with older energies, consistency of politics and consumer acceptance also inhibit further growth.
Security of energy supply will be the biggest incentive to adding more renewables to the energy mix. China will ‘leap frog the west’ in both technological advances for conventional fuel and renewables; the country is already very active in wind, solar PV and in cleaning up its coal generation. As China has little proven reserves of oil, the driver for such technological advances will be the country’s energy security and its air quality.
With access to both oil and gas, the US does not have a highly developed renewables sector although Vivienne expects a greater focus on wind power. In the UK, tidal wave offers ‘promising technology’. Good biofuels do make a difference, with the carbon footprint of cane-based ethanol being lower. Airlines have shown a willingness to adopt bio-aviation fuels but with very small margins, will higher cost fuels and higher costs flights be acceptable?
Achieving renewable production on a global scale will be very hard to achieve but many opportunities exist for smaller companies offering microgeneration.
Reducing CO2 emissions
The much-hyped Copenhagen climate change talks in 2009 highlighted that a global agreement to reduce CO2 emissions was ‘unlikely’. Believing it is too late to stop temperature rises, Vivienne says we must accept CO2 emissions and adapt to climate change by reducing energy demand and raising efficiency. To mitigate against the issue of environmental migrants forced to flee rising water levels and hotter temperatures, the world must help. In Vietnam, mangrove swamps have already been created to help combat rising sea levels.
Solutions to a massive problem
Concluding that global energy provision was a ‘massive problem’, which will necessitate investigation into every emerging technology to help find solutions, Vivienne said the inclusion of nuclear in the energy mix was essential.
Asked by Fuel Oil News what skills would help better secure our energy future, Vivienne replied ‘communication.’ The energy industry is largely run by engineers who can’t communicate. Whilst engineers and scientists will still be required, people who possess skills to better inform the public – perhaps social anthropologists – and raise their perception of the energy industry are definitely needed.
Next year, the Morrow family celebrates 100 years of oil retailing in Lisburn, Northern Ireland. And throughout the decades, the business, which eventually became Morrow Fuels, has proudly guarded its family ownership and has striven to live up to its long-established reputation – to go the extra mile to meet customers’ needs; Peter Clayton reports
“Oil retailing has been in the family since1913, when Colin Morrow’s great aunt sold paraffin from her village shop for lamps and heaters,” says a member of the most recent generation of Morrows to run the business, Jonny. “Her shop was in the exact location still used today as Morrow Fuels’ main depot – at Gravelhill Road, Maze.”
Colin Morrow originally began as an engineer, manufacturing steel oil tanks for the domestic heating market. He saw his natural progression as moving more into the oil market, and bought his first distribution tanker in 1988. As the company became established, Colin’s wife Joan and their three sons – Jonathan (Jonny), Simon and Phillip – all joined the business.
“Because of the housing boom during the 1990s, we enjoyed rapid growth and steadily grew our tanker fleet from one in 1988 to 11 in 2012,” adds Jonny.
The most recent addition to the Morrow fleet is a specially designed 4×4 tanker which can cope with the extremes of weather, and the very worst of terrain.
“Last year’s extreme weather caused so many people in Northern Ireland to go without oil,” explains Jonny. “Houses off the beaten track stayed cold as regular oil tankers just couldn’t get to them. This meant many people had very little heating during one of the coldest winters we have seen in years.”
It was this – combined with the company motto – which prompted Morrow Fuels to invest in their new custom-built vehicle which, claims Jonny, allows the company to deliver fuels whatever the weather and regardless of challenging landscapes.
A convertible oil tanker?
“When we had a press launch for the new truck, with the tagline ‘service you can trust’, we had a great response from the public and customers alike. Of course, Murphy’s Law would have it that Northern Ireland has had virtually no snow or ice this winter, and has even experienced record high temperatures for February! So for next year, the Morrow boys are thinking about building a convertible oil tanker!” jokes Jonny.
As is shown by this latest vehicle, the Morrow family know their tankers. In fact, to complement the rest of the business, Morrow Fuels diversified into tanker building some 20 years ago when it became apparent to the family that there was an urgent need for quality built oil tankers in the principality, in fact they were the first company in Northern Ireland to build their own tanker barrels from scratch. This part of the business has recently enjoyed a record number of sales, and Jonny – an engineer by background – is looking forward to another good year. Just about to go live is their new website
www.morrowtankerservices.com.
As distributors, Morrow Fuels operates within a 30 mile radius of its main depot at Maze, close to Lisburn, with satellite depots in Belfast and Bangor. Around 80% of company business is supplying domestic customers. The remaining 20% is split evenly between agricultural and commercial customers.
The state of the industry
Asked about how he perceives the current fuel distribution industry in Northern Ireland, a thoughtful Jonny replied: “The biggest problem we can see with the current market is that anyone can buy a tanker for around £5000. Along with a pay-as-you-go mobile phone, they can start an oil distribution business – undercutting rates and poaching valued customers.”
Jonny is convinced that the Irish distribution industry is currently going through its hardest period of trading for decades. “Seasonal temperatures are too high, oil prices are still rising, and the economy is struggling more than ever,” he says. “Added to this, margins are getting tighter and tighter, vehicle fuel and insurance costs are all on the up, and more and more one-man-band operators are getting into the business with little or no knowledge of the industry.
“But on a brighter note,” he concludes, “We’re still experiencing some growth… not on the scale it once was, but in a diminishing market, threatened by natural gas and renewable energies, any growth at all has to be considered good. We find that, although customers always want cheaper and cheaper fuel, they still appreciate a good quality product and ‘service you can trust’… after all, we do go the extra mile to meet their needs.”
With a company slogan, “more smiles per gallon”, Northern Ireland based Thompson Fuels has established a reputation as a happy and helpful team, willing to go the extra mile (and smile!) for customers.
The company has evolved during the years. It was established in 1968 to provide a coal delivery service. Ten years later, the family business diversified into oil sales, starting off with one oil delivery lorry and one employee. Thompson Fuels was registered as a limited liability company in 1993, although it remained a truly family-run business – as it is today, with three sibling directors: Mark, David and Aaron Thompson.
Since then, the customer base has steadily grown. The company now has 15 tankers and a full-time staff of 30, operating out of five depots. For its domestic customers alone, Thompson has an annual throughput of more than 20 million litres.
“We strive to maintain a modern fleet of lorries with well trained, motivated staff,” says Aaron Thompson. “As you can imagine, our business has changed considerably over the years – from coal and bottled gas deliveries being our original main lines of business, to oil fired central heating fuels taking over. However, how things change… coal sales have significantly increased again in recent years.”
Although the company focuses on domestic customers, Thompson also deals with both commercial and agricultural clients. And the Thompson “patch” is considerable – covering an approximate 20 mile radius from each of its five depots, located in Tandragee, Portadown, Banbridge, Markethill and Fintona, as well as Belfast and the surrounding areas.
Responding to market demand, Thompson has also diversified into selling lubricants and has recently become a Maxol lubricant agent. “We also retail decorative garden stones for flower beds and rockeries during the quieter summer months,” continues Aaron. “And we still maintain a successful coal sales department, which we have developed and grown over the years – from importing and packing our own stock, to supplying retailers and carrying out our own delivery and cash ‘n carry services which we operate out of all our depots.
Emergency run-out service
“Our depots also operate an ‘emergency run-out drum’ service, which has proved to be very popular with the public; they tell us this is very convenient as they can get as much or as little as they need.”
It has always been part of the company’s ethos to provide the service – and a little more – expected by its customers. “As distributors with a reputation for providing a dependable service to the public, we have to be able to adapt and cope with anything – especially when demand is at its highest during the winter months,” says Aaron. “With a reliable, competent staff – and storage capacity in excess of one million litres – we are well equipped to meet public demand, regardless of winter weather conditions.
“We always try to encourage our customers to buy early in the winter, before the cold weather sets in. However, it doesn’t always happen. We find that most customers now tend to buy as and when they need it.”
Aaron believes that the oil distribution industry has changed over the years, becoming a lot more competitive due to the constant fluctuation of oil prices. But, with so many years experience in the sector, he is philosophical about the future. “As a business, we believe you have to be competitive, but not at the cost of profitability,” he says.
“We don’t get distracted by what our competitors are doing… we are focused on our own business and concentrate on giving our customers top quality fuel and service at the best possible price! And by doing exactly that, we provide our customers with more smiles per gallon!”
www.thompsonfuels.com
Last winter’s weather conditions throughout the island of Ireland were unprecedented with sudden and long-lasting frozen spells – accompanied by thick snow and treacherous road conditions. In the thick of it – literally – were home heating fuel distributors who struggled, but in most cases doggedly persevered to provide a lifeline for customers in some of the most remote and wild locations
“This year, we’re getting better prepared,” says Patrick Doherty, director of Doherty Oils which operates a fleet of five oil delivery tankers, distributing fuel throughout the Tyrone and Fermanagh areas.
“If we’ve learned any lessons from last year, it would be to have all of our trucks psv’d and well maintained.
“We’ve also decided to put our own 40 foot lorry on the road to haul fuel direct from the terminals,” he explains. “We have an excellent haulier – Lisburn-based Pettrans – who bring 95% of our fuel at the moment, but in the busy period even they find it very difficult to care for all customers, as any haulier would.
Competitive prices
“We’ve installed two extra 55,000 litre kerosene tanks and have just got permission to store our own petrol underground, so that we can supply the local filling stations direct from our depot in Omagh. This is all at a cost, so we‘re hoping for another winter like last year!” he adds. “But our strong relationship with a range of major oil suppliers ensures customers consistently receive highly competitive prices.”
Big or small, all fuel distributors throughout Ireland learned important lessons from last year’s experience. Topaz – with the largest network of home heating oil distributors in the country, and a fleet of more than 250 tankers – is no exception.
The company is incorporating many of those lessons into its strategic planning for the 2011/2012 winter period. Marketing activity will focus around reminding people to order early, and the company’s product offering has diversified to cater for both the worsening economic and weather climates.
Topaz Thermal is a premium home heating oil with a special additive to reduce boiler breakdowns and provide 11 days longer per year from the oil. Emergency 20 litre drums are being made available to purchase from company depots, and small delivery amounts will be available.
“Last winter’s weather conditions called for some very timely and crucial response measures from the Topaz Local Fuels team,” Adrian Gallagher, Topaz home heat business manager, told Fuel Oil News. “Many customers did not realise that their oil tanks were so low and the increased demand during the cold snaps put pressure on oil companies, meaning many people had to endure the harsh cold while they waited for delivery.”
Priority attention
However, the company’s sales team realised that some circumstances needed more immediate attention than others. At the time of order, each customer was therefore asked about their level of need, and deliveries were scheduled based upon this information. Pregnant women, people with disabilities, and houses with older people and small children were given priority. Others were asked to wait no longer than 48 hours.
For those who had to wait, the Topaz team delivered drums of 20-50 litres to tide them over until full delivery could be made. Priority was also given to organisations who deliver essential services to keep the country running in spite of the weather, such as the army, defence forces and the Dublin Airport Authority.
The company’s ‘need-based’ scheduling policy certainly came into play when the Dublin Airport Authority reported that their snow ploughs had run out of fuel, and unless delivery could be made within a few hours, the airport would be forced to close. Even though Topaz Local Fuels were fully booked for 48 hours, they quickly identified and re-scheduled non-urgent customers and delivery was made to Dublin Airport within an hour.
Back at Doherty’s; alongside its traditional fuel distribution service, the company is also planning to expand its coal and firewood business, which, says Patrick Doherty, proved profitable last year. “As one of the most progressive fuel distributors in the North West of Ireland, we’ve made our contingency plans for another winter of freezing conditions, and are ready for anything that’s thrown at us!”
As majors continue to withdraw from the downstream market, Fuel Oil News was keen to quiz BP about its position within the UK’s wholesale market.
To this end, FON recently met with Simon James, who has held the position of wholesale negotiator at BP for just over a year. Simon’s role involves maintaining and building existing business as well as identifying and developing new business opportunities.
What is BP’s position in the UK’s wholesale market?
A recent strategy review has looked at BP’s wholesale business within the context of its larger UK organisation, and concluded it to be a good fit.
“Currently, BP is a relatively small player in the wholesale market,” Simon told FON. “However, following the review we believe we’ve identified what needs to be done to enable us to compete more effectively in this market. In the past, we probably expected to extract higher margins than were possible which impacted on volumes. We’re now looking at wholesale in a slightly different way; of course, making a profit is still important but, we see many other benefits to doing this business other than pure margin.
“As well as ensuring the operational efficiency of our infrastructure, having a wholesale arm enables us to improve cost build-ups and ensure assets are fully optimised. The business naturally complements our nationwide network of 1200 service stations and strategic supply locations at Hemel Hempstead, Northampton, Kingsbury, Hamble and Belfast. (With the exception of Hemel, all supply kerosene.)
As other majors withdraw from the UK’s downstream sector, how does BP see its role?
“We see ourselves as being in a great place to take advantage of others divestments in UK downstream. Our strong supply chain and import locations give us a competitive advantage.
Having sold its last UK refinery to Petrochina/INEOS where does BP now source product?
“As the first major to divest its UK refineries – Coryton and Grangemouth – it was a brave move and, it has taken awhile to adjust from an integrated refiner/marketer to become more of a pure play retailer and an importer/purchaser of product. Of course, BP does still operate one of Europe’s largest refineries – Rotterdam refines 400,000 barrels of crude per day.”
BP has also divested non-core terminals – Aberdeen and Inverness to GB Oils, Dalston to INEOS and the Isle of Wight to MRH.
Who are BP’s main customers?
“We deal with a variety of customers both spot and contracted. We’ve a good mix of business both new and long-term and we’re currently getting a number of enquiries from prospective customers looking for long-term security of supply.
Does BP see a long-term commitment to the downstream sector and, if so, why?
“Retail is a tough environment and we still see many of our competitors reviewing whether to stay or go. That said, we’re firmly committed to the UK downstream market – we’ve spent a number of years ensuring that our service stations are the right sites in the right locations. BP’s strong retail brand name is now backed up by our relationship with Marks & Spencer’s Simply Food and our own Wild Bean cafes. Add to this our Nectar points loyalty scheme and our Ultimate premium grade fuels and, we have one of the strongest offers in the marketplace.
“As a further demonstration of our continued commitment to the UK market, we’re making a significant investment in an exciting new storage project on the Thames at Canvey Island. This will enable our London-based supply and trading team to import product into the south east before using the UKOP pipeline to move this product inland at competitive rates. We see this as an excellent opportunity to better support our existing business and, a strong base from which to develop new business.
Repositioning and gaining new business
“Although it’s true to say that BP probably didn’t react as quickly to market changes as it could have, today, we’re excellently placed to take advantage of this changing market. With the option of both importing and purchasing from third parties, we’re in a great position to offer customers competitive prices for quality products from first class facilities with a reliable supply. Market changes have unsettled people who’ve previously had long-term relationships with their supplier and we’re already gaining new business as a result. BP is definitely in the wholesale market place and keen to do business.”