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The tank terminal market in ARA is facing several challenges and issues that influence the short- and mid-term dynamics. Oil market developments, globally and regionally, could have an impact on the ARA Oil tank terminal market.

We have selected three main themes that impact ARA oil Tank Terminal markets in the short and medium term:

COVID-19 outbreak: Increase in tank demand and storage fees due to massive oversupply on petroleum markets (deep contango)

IMO 2020 and changed bunker fuel specifications: Growing ARA tank storage demand

Electrification of passenger cars: Downward effect on road fuels consumption but mixed effects on tank storage demand

Reverse dieselization of European passenger car sales: The change in car sales might decrease structural imbalances and lead to less demand for tank capacity

COVID-19 outbreak

Since the beginning of the Corona crisis the market is clearly in contango. Looking to the calendar spread it was already expected that market would move into contango on a short term. However, the Corona crisis was the big trigger for the start of the contango period. As the graph shows the market is in a deep contango and how long this situation will persist is the main question. It depends on how fast the production and demand of oil products will become in balance again.

As we all experience the impact of Covid-19 is huge on our daily life and therefore also on our fuel consumption. The Corona effect needs to be incorporated on the forecasting models. Assumption is that the current lockdown lasts three months and has a negative impact for all fuels with the exception of heating oil. Reduction of diesel and LPG volumes are a bit lower because both diesel and LPG consumption is not limited to passengers’ vehicles. Commercial vehicles like buses and trucks don’t use gasoline fuels but usually diesel or LPG. Jet-kerosene is very much hit as almost all passenger traffic has stopped.

After the lockdown, consumption level will gradually normalise, which will take five years. However, it is unclear yet what the exact impact of Covid-19 will be on the travel behaviour of people.

IMO 2020

The International Maritime Organization (IMO) has implemented its global legislation to limit sulphur emissions as a result of marine fuels. The legislation calls for a reduction of the sulphur content in marine fuels to less than 0.5%, which has started January 1st, 2020. Until the start of 2020 the limit was 3.5%. The first months of 2020 show that VLSFO seems to be the dominating bunker fuel. Consumption of MGO increased only slightly by around +10%. HFO is about 15-20% of total fuel oil consumption, with the rest being mostly VLSFO.

The consumption of bunker fuel is heavily correlated with global trade, so we expect it will take several years before bunker fuel market is at the same level as in 2019. However, terminals in ARA specialized in fuel oil will benefit from the growing size of the fuel oil bunker market. As the number of grades has increased and more components are needed to blend into the 0.5%FO / HSFO / MGO, more storage capacity is needed.

Additionally, on top of these structural effects on fuel oil supply, demand and imbalances, there is an enormous oversupply in the market due to the COVID-19 / Corona crisis. This has resulted in a steep contango in fuel oil forward prices and is stimulating traders to buy and store excess fuel oil supply. This provides major support for fuel oil storage rates in the short to medium term.

Electrification of passengers’ cars

Electric mobility is growing very fast. In 2018, the global electric car fleet exceeded 5.1 million, up 2 million from the previous year. China sold over 1 million cars in 2018, followed by Europe (385,000) and US (361,000). Norway has the highest market share for sales (46% in 2018). According to the IEA the projected growth in the New Policies Scenario of electric vehicles would cut oil products by 2.5 million barrels/day.

In a push to limit GHG emissions originating from vehicles the European Commission has imposed emission targets to car-producers. New cars are tested and need to have CO2 emissions lower than a certain limit. This limit has been gradually lowered to an average of 130 gram per kilometre in 2015 and will be lowered even further to 95 gram per kilometre as from 2021. CO2 emissions are directly proportional linked to fuel efficiency and therefore have a direct effect on consumption volumes per car per kilometre. As from 2025 the EU emission target is -15% relative to 2021. As from 2030 the target is set on -37.5% relative to 2021.

If car manufacturers do not comply to these targets, they will get penalties because of non-compliance. As BEV’s count as zero emissions cars, it is expected that these targets drive the production of electric cars.

However, reality is different as EU average car emissions are increasing again, see figure 5.6b. Higher SUV sales and not diesel decline have resulted in higher CO2 emissions.

Nevertheless, this electrification trend will have an impact on the gasoline consumption. In ARA the port of Amsterdam plays a central role in the gasoline segment. Because Europe has a structural surplus of gasoline there is a continuous flow being exported out of Europe to gasoline outlets. Consumption of European gasoline is expected to decrease, mainly because the electrification of its car fleet. As the production of gasoline will not decline or not decline that fast, it is expected that the surplus of gasoline will increase, which is beneficial for terminal operators.

Reverse dieselization of European passenger car sales

Due to a mix of governmental policies and changes in consumer preferences the share of diesel-powered cars relative to total cars sales has shifted dramatically in Northwest Europe. Consequently, the consumption of diesel is decreasing and it is expected this trend will continue. As production of diesel will not decline or not decline that fast, the deficit of gasoil / diesel is expected to decrease, which is not beneficial for terminal operators.

Conclusion

Although the oil market is really hit by Covid-19, the direct impact on oil terminal operators is positive as the market is currently in a deep contango. Consequently, tanks are rented out and storage fees have increased significantly.

Other themes like IMO 2020 and electrification of passenger cars seem to have positive effects on the profitability of terminal operators. IMO 2020 create more tank storage demand because of a higher number of bunker fuel grades and more components that are needed, while for gasoline the structural imbalance is expected to increase.

However, for the storage demand for diesel is expected to decrease because the current deficit is expected to decrease.

Having access to accurate, up-to-date oil storage rates is crucial to make the right business decisions.

With our Global Oil Storage Rate Report, you’ll gain access to the single and only authoritative source of storage rate information available worldwide. It will provide you with transparency on price levels in global tank storage markets regularly, so you are always in the know and can set the right ask and bid prices for your storage.

Download your FREE Sample Report now and discover what information you could have at your fingertips each quarter.

The COVID-19 virus has a huge impact on the global oil market. The virus and the economic crisis it evoked results in a large decline of the oil demand. I this article we will describe the consequences of this drop in consumption on the tanks storage demand in main oil hubs.

A collaboration between Q88 and Insights Global, updated version

In the world of the liquid storage some 5,000 terminals can be identified. These terminals have different kind of functions. A terminal’s main function is to balance supply with demand, they can act as import terminal, as trading platform or offer strategic storage options.

Q88 and Insights Global are proud to partner to bring our clients timely information. Never before has the relevance of these terminals been highlighted, and in this article we will analyze the recent confluence of events including 1) super contango due to OPEC+ conflict and 2) demand destruction due to the COVID-19 crisis, impact tanker vessel visits, and berth occupancy at the four major trading hubs.

In the international oil and petrochemical market four main trading and storage hubs can be distinguished: ARA (Amsterdam-Rotterdam-Antwerp), Houston, Singapore and United Arab Emirates (UAE). Due to their large consuming backyard, their refinery infrastructure base and presence of a trading or financial industry, these hubs have become dominant regions in this trading industry.

Figure 1: Location of tank terminals around the globe; source TankTerminals.com

More details of the key trading hubs

The ARA consist of 68 terminals with a total capacity of around 36Mcbm. From these terminals, 65 terminals are marine terminals. Based on capacity the most dominant player is Vopak (9.2Mcbm) followed by Koole (3.5Mcbm), VTTI (3.2Mcbm) and Oiltanking (3.2Mcbm).

The port of Houston has 52 terminals with a capacity of approximately 29Mcbm. Main players are Kinder Morgan (6.3Mcbm), Enterprise Products (4.7Mcbm) and Magellan Midstream (4.2Mcbm). Of these terminals, 35 terminals have barge access and 24 terminals have sea access.

Singapore has 21 terminals with a total capacity of 16Mcbm. The biggest storage player in this area is Vopak (3.3Mcbm), followed by Oiltanking (2.5Mcbm) and Universal Group (2.3Mcbm).

The UEA consists of 61 terminals with a capacity of 18.5Mcbm. 20 of these terminals have sea access and 11 have barge access. The most dominant storage player is Vopak (2.6Mcbm), ADNOC (2.3Mcbm) and Horizon Terminals (1.7Mcbm). All these terminals are marine terminals.

“When deep-diving the global tank storage market and specific areas, it absolutely essential to understand how many storage capacity there is, how many players are active and what their position is”, according to Jacob van den Berge, Marketing and Sales Manager at IG. “This is the first step in defining the competitive landscape of the industry.”

Major events and their impact on storage demand further explained

Super contango due to OPEC+ conflict

What is contango? A contango is a situation where the price of front month oil futures is lower than oil with future delivery. If the spread between these prices is large enough to cover storage, finance and shipping costs, a trader is able to make a profit by buying oil now and selling it on the futures market for a later delivery. However, in order to capitalize on this profit, a trader needs storage (and transport) capacity. That is what happened in the first quarter of 2020 with massive demand for storage in ARA and the other key trading hubs resulting in high occupancy rates, putting a premium on free tank capacity now.

As the contango market structure persists and there is a lack of onshore storage facilities, traders are turning to tanker vessels to store their precious hydrocarbons.

This situation was heightened when Russia and Saudi Arabia could not come to terms regarding the height of production cuts to stabilize the fall in oil prices and Russia stepped out of the OPEC+ alliance. This resulted in Saudi Arabia offering its crude with huge discounts to its international customers, which triggered a free fall of oil prices and resulted in a super contango.

The recent peace between these two top producing countries and the subsequent OPEC+ deal has only reduced the speed of oil prices declining. The recent negative WTI oil prices show that we are far from balancing the market.

“Having an understanding of these key issues is imperative while calculating potential earnings,” says Chris Aversano, Product Manager at Q88.com. He continues, “Many of our products have earnings estimators that are built-in, giving our clients a greater understanding of the marketplace.”

Demand destructive impact of COVID-19

As we know, Coronavirus originated from China, and initially affected only China and its enormous economy. However, as the virus spread, different government lockdown interventions were initiated and economies came to a standstill. Less consumption, less production, less trade and less investments caused demand to be reduced significantly, all occurring in the first quarter of 2020.

A new feature in TankTerminals.com, called the Logistical Performance Benchmarking add-on, enables us to see what’s going on at terminals on a weekly basis. Amongst others, we can look at the activity levels at tank terminals.

So what did the numbers at the terminals of these major trading hubs show? Is there any impact of the super contango and COVID-19 crisis visible?

Putting It All Together

Tanker visits per hub per quarter

In figure 2 it can be seen that the number of tanker vessels visits at the marine terminals of the different hubs, ARA and Singapore show a similar pattern as applies for Fujairah and Houston. For ARA and Singapore applies that the peak of the visits were at the end of 2017 and the least visits in the first quarter of 2020. For Houston and Fujairah applies that highest number of tanker visits was in the second quarter of 2018 while the lowest number of tanker visits were seen in the first quarter of 2019.

Figure 2: Tanker visits per hub per quarter; source TankTerminals.com

The maximum value in ARA was 15405 tanker visits and the minimum value with 13591. In Singapore, the maximum value was 4756 and the minimum value was 3956. For Fujairah the maximum value was 1196 and the minimum value was 878. The maximum value in Houston was 1372 and the minimum value was 1153. As can be derived from the number of tanker visits, the ARA region accounts of almost 68% of all tanker visits of these four hubs combined. This is because of the extensive use of tanker barges and coasters in this area to distribute products within Europe.

Marine gross trade per hub per quarter

Marine gross trade is calculated with the DWT of tanker vessels that loaded and discharged at a certain terminal. When we look closely at the marine gross trade trend and we compare that to the number of tanker visits, we are able to distinguish a similar trend as seen in figure 3 below.

Figure 3: Marine gross trade per hub per quarter; source TankTerminals.com

It is evident that the marine gross trade of the different hubs are more in line with each other. ARA accounts for 38%, Singapore 32%, Fujairah 18% and Houston 12% of the total sum of marine gross trade within these four regions. ARA is known for its intra- and inter- regional barge transports which contains lots of tanker visits with low volumes of product. Houston has a lot of push boat transports which are not included in this tool’s coding. Furthermore, we excluded Galveston and Beaumont area from the numbers.

Berth occupancy per hub per quarter

Berth occupancy rates per region show a diverse picture on a quarterly base. However, some sensible deduction can be derived from looking at the data. For the regions ARA, Singapore and Houston, the average berth occupancy rates per terminal show a rather stable picture per quarter with minimum values around 31-32% and maximum values around 34-35%. Fujairah has a relatively inconstant structure with a minimum value at around 29% and maximum value just below 40%.

Figure 4: Average berth occupancy per quarter; source TankTerminals.com

It is evident from the chart above that the average berth occupancy rate for all hubs combined is the second highest in the first quarter of 2020. Across all regions, the data implies that average berth occupancy in this quarter is far above the average value. The decreasing trend up to the first quarter of 2019 highlights the ‘wait-and-see’ attitude leading up to the IMO 2020 marine fuel implementation. The peak in berth occupancy rates in the second quarter of 2019 and subsequent increases in berth occupancy since then can be explained as terminal operators were preparing for IMO’s legislation that went into effect at the beginning of 2020.

Conclusion and what is next?

When looking at the statistics of tanker visit numbers, marine gross trade and average berth occupancy rates, it can be concluded that the main trading hubs show similar patterns, especially in the second quarter of 2020 in which the defining events OPEC+ conflict and COVID-19 evolved.

In the first quarter of 2020 the number of tanker visits of the different hubs was at a minimum while the average berth occupancy rates were at their second highest. The low number of tanker visits is likely to have been caused by 1) high fill rate, or almost full tanks of terminal operators due to contango storage play options and 2) lower consumption levels due to demand destruction by COVID-19.

The high berth occupancy rates can be explained that, despite the low number of tanker visits, in the first quarter of 2020 terminal operators were coping with the impact of COVID-19 to their business operations which might have resulted in a bit slower vessel handling at the terminals.

“Knowing how well your ships are performing is crucial during these uncertain times,” say Chris Aversano, Product Manager at Q88. He continues, “Our VMS system gives the owners peace-of-mind to make the right decision at the right time. Additionally, our Position List platform allows for brokers to better serve their clients in a highly competitive and continuously changing space.”

Jacob van den Berge, Marketing and Sales Manager at IG adds: “using different data sets, combining this with our own unique knowledge and expert knowledge of our partners such as Q88 has proven to offer unique market intelligence. This supports our relations in making justified commercial decisions.”

According to figure 5 below, when we focus in at the first quarter of 2020 and look at the tanker vessel visits in ARA on a weekly basis we see the number of tankers at terminal’s berths are all below this time series weekly average. If we than look at the ARA oil product stocks levels for the same time-period, we can actually see a buildup of stock levels since March 12. This in line when the lockdown measures that were initiated by the European governments.

Figure 5: ARA stock levels and tanker visits; source TankTerminals.com

Having access to accurate, up-to-date oil storage rates is crucial to make the right business decisions.

With our Global Oil Storage Rate Report, you’ll gain access to the single and only authoritative source of storage rate information available worldwide. It will provide you with transparency on price levels in global tank storage markets regularly, so you are always in the know and can set the right ask and bid prices for your storage.

Download your FREE Sample Report now and discover what information you could have at your fingertips each quarter.

About the authors

Chris Aversano, Q88, Office: +1 203 413 2030
Jacob van den Berge, Insights Global, Mobile: +31-6 28 34 87 84
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The world is in crisis mode. The Corona virus is gripping humanity, leading to lockdowns, overcrowded hospitals and thousands of casualties. Oil markets are also heavily impacted. As a direct of effect of the Corona lock downs global oil demand plummeted. The OPEC+ cooperation also exploded. Russia and Saudi Arabia couldn’t agree on output cuts. As a result an outright fight for market shares erupted between both heavyweights with oil prices collapsing as a consequence.

Oil markets are totally out of balance. The demand destruction due to the many lockdowns around the world combined with the production increases coming from Arab Gulf States is leaving global markets oversupplied. Estimates range from 10mb/d to 20mb/d. Quite a big range, so no-one really knows how much. But one thing is certain: it’s a very big number. And there is no end in sight. Petroleum markets are notoriously slow in balancing out. Supply is slow to react to low oil prices as costs of maintaining production levels are low. The unit costs associated with crude oil production are mostly costs associated with exploration, drilling and completing wells. After this is finished these are sunk costs, so not relevant anymore. As a result producers will keep pumping oil until prices hit rock bottom.

Due to the oversupply situation a contango emerged on futures markets. In a contango situation prompt oil prices are lower than forward oil prices. Traders are stimulated to buy crude or oil products on the spot market, in order to increase demand, and put this oversupply into storage so that they can sell it on the futures market for higher prices and for delivery somewhere in the future. The contango is there to enable traders to earn money on this play. Otherwise they would not be encouraged to buy crude and oil product from producers because there is no demand. This is called storage arbitrage and this is perfectly in line with what the markets need: filling up tanks to store the oversupply and decreasing oil prices to limit production rates and stimulate consumption.

Who is profiting?

The contango has prompted a run on tanks. If you are able to find free tank capacity now you can make a fortune. Tank terminal owners are, despite the current depressed economic situation, in the best position that they can imagine. But who are these ‘winners’? See below a graph showing the global top tank owners.

Graph 1: global tank storage players

Also globally tank capacity is distributed unevenly and mostly concentrated in hubs. See below for tank capacity per region. As you can see North East Asia, with China included, the country where the outbreak started, has the most tank capacity. The USA and Europe are second and third in this ranking order.

Graph 2: tank capacity per region

How long until tanks reach tops?

For oil markets it is of vital importance to have spare tank capacity to absorb imbalances. However, the current oversupply is immense. How long will it take until global tank storage capacity is full?

Let’s assume that current oversupply is on average around 10mb/d for the coming months. It is probably higher right now but may decrease after the situation becomes normal again and the various lock downs and measures to contain the virus are lifted. Looking at current stock levels in the main hubs, ARA, USGC, Fujairah and Singapore, we see that approximately 75% of commercial tank capacity is full.

That leaves only 25% to go until tank capacity has reached tops. If we assume that this 25% applies to all independent tank capacity globally we can calculate, using global crude and petroleum products tank capacity and correcting for strategic petroleum reserves that are assumed to have a much higher utilization rate, that it will take about 112 days or almost four months for tanks to reach their full capacity.

After tank terminals are full the next most economic option is to charter vessels and use these vessels as floating storage. According to various sources we are already seeing this happen in shipping markets. So in reality, because the combined storage capacity is simultaneously being filled up, it might take a little bit longer for tanks to fill up.

In any case our ARA oil products stock data, Rhine flow data will give a good view on developments in European storage. If you require data to understand global tank terminal capacity our TankTerminals.com database is a vital piece of information you can use, either for analysis or to find free tank capacity. Let us know if you need anything!

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Kind regards,

Patrick Kulsen

Photo by Clyde Thomas on Unsplash

Local generation of wind, solar, hydro and nuclear power, renewable heat and energy conservation together will greatly reduce our dependence on oil, gas and coal exporting countries. Will the energy transition put an end to energy trade?

For most countries, energy independence is just a dream

For nations that never had the luxury of natural resources, renewable energy provides a great opportunity to lessen the dependance on international energy trade. The same goes for nations that already depleted all economically viable reservoirs.

Consequentially, national energy self sufficiency often has been mentioned in support of the energy transition. Self sufficiency however should not be a goal in itself. Costs minimization has been the reason that energy trade has surged over the last decades. Imported coal, oil and gas often simply provide cheaper energy than can be sourced locally.

Costs will of course still be relevant in a carbon constrained world. Regions with favorable climate, favorable geography, low population density, a fleet of operational nuclear power plants or a pragmatic stance on carbon capture will be able to produce low carbon energy far cheaper than less advantageous parts of the world.

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It would be naive to suggest that clean energy will not be traded

If the whole world strives to reduce carbon emissions, front runner countries will reach carbon neutral self sufficiency faster than others. From that point on, some countries will almost certainly be able to reduce emissions faster and cheaper via trade than by continuing to strive for total self sufficiency. If part of a country’s energy demand can be met cheaper via imported low carbon energy, low carbon energy will be traded. There is no sound reason not to.

The challenge now is to predict in what forms renewable or low carbon energy will be traded. What will be the commodities of the future? Six likely contenders:

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Electricity

Electricity is the fastest growing form of low carbon energy. As a commodity, low carbon electricity is indistinguishable from electricity generated in conventional power plants. Low carbon electricity is fully compatible with existing infrastructure for power transport and distribution. New high capacity power lines enable power trade not just between neighbouring countries but also across whole continents. The problem with electricity is that long term storage is complicated and expensive due to the relatively low energy density of batteries.

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Hydrogen

Hydrogen is an energy carrier that can be produced practically carbon neutral. From fossil fuels with carbon capture or via electrolysis using low carbon electricity. As a gas, hydrogen can be transported in bulk via pipelines. Some existing natural gas infrastructure might be repurposed for hydrogen. Below -253 degrees centigrade, hydrogen becomes an energy dense liquid that can be shipped or stored in cryo tanks

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Methane, methanol and other hydrocarbons

Methane is a fossil commodity but can also be produced from biomass. Using hydrogen and (non fossil) carbon dioxide, methane can also be synthesized carbon neutral. The same goes for methanol, various oils, lactic acid and almost all useful hydrocarbons that currently are produced at scale from fossil oil. Low carbon variants are chemically identical to current commodities and can make use of existing infrastructure.

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Ammonia

Ammonia is a commodity currently produced and traded in bulk for the production of fertilizers and other chemicals. Ammonia nowadays is made mostly from fossil methane but it can be produced carbon neutral using hydrogen and nitrogen. Low carbon ammonia can replace current industrial ammonia consumption. Ammonia itself can also be used as a fuel or as an easily liquefied carrier for transport of hydrogen.

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Metal powders

Metal oxidation is a natural process that can be sped up by increasing temperature and exposed metal surface. Metal powder in a flame burns at high temperature. Oxidized metal powder can be regenerated using low carbon electricity or hydrogen. Iron, alumina and other metals are already global commodities. Creating metal powder might be done before transport or on site where stored energy is consumed.

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Biomass

Biomass is a low carbon commodity that already has some traction as renewable commodity. Wood chips, pellets, bio-ethanol, biodiesel are the only carbon neutral energy carriers that are already traded at scale between continents. Further scaling however is bound by natural growth rates. Biomass is only carbon neutral if the regrowth of trees and energy crops is in balance with bioenergy consumption.

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No clear winner, potential for all

In non carbon neutral form, all potential global energy commodities mentioned above already have their applications in our current carbon intensive economy. Most of those industries will stay just as relevant in a carbon constrained world. For all mentioned carbon neutral commodities therefore it is reasonable to at least meet current consumption without carbon emissions.

Carbon neutral electricity has a head start in replacing its fossil counterpart. Electrification of mobility, heating and some industrial processes furthermore assures that the relevance of electricity will grow in a carbon constrained economy. Except for biomass, all other proposed commodities will also be produced mainly using low carbon electricity.

Which future commodity eventually will replace fossil oil as the world’s main energy carrier, will be decided by energy losses in conversion, practicalities in handling, storage and transport, geopolitics and of course first mover advantages. The transition has started, it’s time to place your bets.

The use of crude oil, natural gas and coal has been a primary driver of human progress. Unfortunately, now we know that the use of fossil resources is also a primary driver of anthropogenic climate change. What can be done in the short term?

 

Every tonne of carbon emitted counts

In 2050 and thereafter, cheap and abundant energy will still be of utmost importance for human progress. The big difference is that this energy will also have to be carbon neutral.

Until all of our energy is sourced carbon neutral, every ton of carbon (not) emitted counts. In the coming decades, it will be fairly easy to do without our most carbon intensive energy source: coal. Substituting oil and gas will however be far more difficult. In the short run, the use of gas may very well increase because of climate policy. Gas fired power plants pollute substantially less than coal fired power plants. Trends in oil consumption for the coming decades will be defined by slow but steady reductions in the ‘old’ economies, balanced at first by growing demand in emerging and evolving economies.

Given that oil and gas production, refining and transport will be facts of life for the coming decades, reducing the carbon intensity of oil and gas consumed will be just as important as substituting oil and gas with carbon free alternatives. Here are seven routes that substantially reduce the climate impact of the oil and gas industry.

Electrification of offshore platforms

Using 11 floating windturbines, Equinor will electrify 5 of it’s production platforms. Reducing gasturbine utilization by 35%, the project will cut carbon emissions by ±200,000 tonnes annually. Besides wind power, providing onshore power to offshore projects may also help cut emissions.

Old fashioned plumbing

Leaks in production and transport result in loss of revenue but are nevertheless common. New satellite and drone imagery simplifies the recognition of leaks. Solving leaks, especially methane leaks, reduces the climate impact while increasing the yield of energy companies.

Carbon capture in production

Raw natural gas and oil may contain large amounts of CO2 which have to be removed in order to comply to standards. This is often done directly at the point of extraction. Storing the separated CO2 underground, instead of just venting it into the air, is an effective climate policy.

Utilization of concentrated solar hear

Most of the easily recoverable oil has already been extracted. The remaining, more viscous crudes have to be heat treated before extraction is possible. Normally, steam for this process is produced by burning gas or oil. GlassPoint Solar enables solar heat to replace this fossil fuel consumption.

CCS at refineries

Oil refineries consume large amounts of hydrogen for removing sulphur and other contaminants from crude oil and to convert crude into refined fuels. This hydrogen is produced from natural gas, with CO2 as byproduct. Capture and storage of this pure stream of CO2 is rather easy.

Reduction of gas flaring

Flaring of gas at oil wells in itself is a climate measure, as CO2 from burned methane has a far lower climate impact than the methane itself. Still, routinely burning away gas on site that could just as well be used productively elsewhere should be prohibited as much as possible.

Abandoning unconventional reservoirs

Extraction and refining of oil from tar sands, in the arctic or from shale reservoirs by nature is more carbon intensive than production from more conventional fields. Given most of fossil resources should be kept underground anyway, it’s best to abandon unconventional fields first.

License to operate

At sufficient scale, most of the options mentioned above are not extremely expensive. Given that almost all oil majors have come to terms with the fact that fossil carbon is the prime source of anthropogenic climate change, implementation of measures that greatly reduce the climate impact of operations should be a no brainer.

Furthermore, if oil and gas producers are not yet intrinsically motivated, exposure to cap and trade programs, carbon taxes, shareholder pressure and eventually consumer boycots should help enforce the utilization of renewable energy in production and refineries, the capture and storage of carbon and the minimization of leaks and flaring.

If you are active in oil and gas, now is the time to take action.

Auteur: Thijs ten Brink, Photo: Zbynek Burival via Unsplash Public Domain