In its recently published ‘World Oil Outlook 2040’, OPEC described 2017 as a “road to adjustment.” This seems like a fair assessment, in light of the significant changes that the industry has experienced since OPEC decided to cut production at the end of 2016.
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Adjustment was also a key theme at the European Refining Technology Conference (ERTC), which recently took place in Athens, Greece. Refiners are bracing themselves for the impending IMO legislations that are due to come into force in January 2020. In the opening remarks to this year’s conference, Alan Gelder from Wood Mackenzie warned that the IMO’s marine sulfur cap could result in a significant fall in regional fuel oil demand in Europe, which will require greater exports of light distillates and fuel oil.
Back in the August 2017 issue of Hydrocarbon Engineering, I referenced a survey conducted by KBC Advanced Technologies which claimed that just 15% of oil refiners currently have a plan in place to cope with the IMO’s strict marine sulfur cap. A reluctance to embrace change was also in evidence during a keynote presentation from Edmund Hughes of the IMO during ERTC. In response to the poll question: ‘do you think there will be sufficient compliant fuel oil available for international shipping on 1 January 2020’, a whopping 64% of respondents answered ‘no’, with just 26% feeling more positive and 10% sitting on the fence. Despite the audience’s scepticism, Hughes was quick to insist that there is no chance that the IMO will be delaying the 2020 deadline. Change is coming, and the industry must be ready to adjust accordingly.
Continuing the theme of ‘change’, the International Energy Agency (IEA) recently introduced its ‘World Energy Outlook 2017’ with the headline ‘a world in transformation’. The report notes the increasingly important role that renewables and natural gas will play over the next 25 years, as the share of electricity in the energy mix continues to grow. The IEA also points out that China’s move towards a cleaner and more diversified energy mix will play a huge role in determining global trends, potentially sparking a faster transition to clean energy.
Despite these changes, the IEA insists that it is too early to write the obituary of oil, with rising oil demand expected to slow down, but not reverse, before 2040. The IEA believes that other sectors – namely trucks, aviation, shipping and petrochemical production – will drive oil demand to 105 million bpd by 2040. In its World Oil Outlook 2040, OPEC agrees that fossil fuels will retain a dominant position in the global energy mix, despite a declining overall share. OPEC also notes that secondary capacity additions have become a key gauge of the refining sector’s ability to meet increasing demand for clean and high quality products. It forecasts that the projected long-term growth in demand for light low-sulfur products, as well as flat to declining residual fuel demand, will result in a need to add 10.7 million bpd of conversion units, 22.5 million bpd of desulfurisation capacity and just over 5 million bpd of octane units in the period to 2040.
While the global energy landscape is undoubtedly changing, an increased focus on innovation, operational efficiency and collaboration can help to ensure that our industry not only meets the challenges that lie ahead, but that it thrives in the opportunities that change presents.