DANIEL LEUCKX Policy Executive, EUROPIA Recent and proposed legislative developments PLATTS, Middle Distillates 4 th Annual Conference
Agenda 1) About EUROPIA & CONCAWE 2) Recent and proposed legislative developments 3) The essential role of refining industry in the EU s future a) EU refining: leader in energy efficiency & environmental performance b) Restoring balance between energy & climate policies 4) Conclusion 2
CONCAWE AISBL 7 Science Advocacy Crude exploration Crude production Transport Refining Transport Marketing Upstream Downstream 3
CONCAWE/EUROPIA 43 Member Companies represent 100% of EU Refining 4
RECENT AND PROPOSED LEGISLATIVE DEVELOPMENTS Climate, Energy and Air policies 5
Climate, Energy and air policies affecting middle distillates An overview Air Climate Energy Sulphur in Marine Fuels Directive - - Monitoring Reporting Verification shipping emissions - - Renewables Energy Directive - Fuel Quality Directive - ETS Aviation - - - Energy Efficiency Directive Cars emissions - Clean power for transport 6
Sulphur and Marine Fuels Directive Sulphur in marine fuels Directive: EU goes beyond International Marine Organization (IMO) sulphur reductions by 2020. This worsens the diesel imbalance. Source : Wood Mackenzie 7
Sulphur and Marine Fuels Directive CONCAWE s viewpoint Reducing marine fuel sulphur content requires a radical shift in the way refineries make these products 1.0%S fuel is made using residual components produced from low sulphur crudes by simple distillation processes 0.10%S fuel is a distillate type product, very similar to domestic heating oil, requiring distillate components produced to a large extent by conversion processes 0.50%S fuel will require components produced by desulphurisation processes (distillate type fuel, or a blend of residual and distillate range material) EU refineries are investing in conversion processes About $30 billion over 2009-2015 period (in 2011 $) Sufficient to meet demand for low sulphur fuels to 2015, including 0.10%S marine fuel Significant additional investment would be required to reduce non-eca marine fuel to 0.50%S in 2020 8
The Renewables Energy Directive (RED) for transport. Renewables Energy Directive (2009/28/EC): Share of energy from renewable sources in all forms of transport in 2020 is at least 10% of the final consumption of energy in transport for each Member State. Energy consumption 2010 (Mtoe) 6 7 300 Road Inland Air Inland navigation Source : DG MOVE Pocket 2012. Source : EU- JRC report November 2013. 9
The Fuel Quality Directive (FQD) for transport. Fuel Quality Directive (2009/30/EC): Improve the greenhouse intensity of road fuels by 6 % in 2020 versus 2010 (objective in g CO2eq/MJ of fuel). Source : Wood Mckenzie 10
The Fuel Quality Directive (FQD) for transport. How to improve the Well-to-Tank emission value Source : Wood Mckenzie 11
Likely Impact of DG Climate Proposal for Crude Differentiation via Fuel Quality Directive Canada Gas Liquids Canada Gas Liquids Oil Sands Crude U.S. Mogas Europe Crude Diff. via FQD₁ Oil Sands Crude U.S. X? Mogas Europe Diesel X Diesel U.S. EU Fuels Trade: $32B/year 2 in 2012 EU imported 340 KBD of diesel from U.S. 3 EU exported 350 KBD of mogas to U.S. 3 Crude Differentiation could eliminate the U.S. as a source of diesel imports for the EU n Impacting EU refining competitiveness; Security of supply and for trade relationships under pressure 1. FQD = Fuels Quality Directive 2. AFPM estimate 3. From US Energy Information Agency (EIA) 12
The infrastructure mandates for clean transport. Infrastructure mandates for alternative fuels: Commission proposals to force development of LNG, CNG, H2 and electric refueling networks. Supply doesn t drive demand, however demand creates economical supply Proposal of mandated infrastructure VEHICLES INFRASTRUCTURES Cost 10 B ALTERNATIVE FUELS CONSUMER DEMAND Infrastructure question is the only one addressed Max. distance between refuel points (# units) ROAD MARINE LNG CNG H2 Electricity 400 km on TEN-T roads (#144) All main EU ports (#139) 150 km (# 654) Source : Commission proposal on infrastructure for clean transport. 300 km (#77) 8 Million - - - 13
Technology development in Internal Combustion engines Source: Ricardo (2013) Source: Ricardo (2013) 14
The essential role of refining industry in the EU s future Oil products: Indispensable now, essential in the future EU refining: leader in energy efficiency & environmental performance Growing awareness of Refining difficult competitive position 15
Replacing oil products is not technologically easy nor economically sustainable yet in our society Oil derivates in everyday life
To cope with shifting market demand and environmental legislation the EU refineries increased their complexity which led to increased energy usage Figure: EU energy consumption and efficiency trends relative to 1992 Source: Solomon Associates 17
The oil refining industry has contributed actively to improve EU air through investments in reducing their emissions and in developing cleaner products Figure: Reduction in Sulphur emissions from refineries in relation to refinery output 1979-2010 18 18
EU Refining industry # 1 process innovation and among most innovative industries for products Source: European Commission; European Competitiveness Report 2013 19
Growing awareness of EU policy makers: the crisis of the oil refining industry in Europe and the negative implications Industrial Policy Communication (EU Commission, October 2012) EU should reverse the declining role of industry in Europe from its current level of around 16% of GDP to as much as 20% by 2020 The Commission to carry out sectorial fitness checks: the first two of these will look at petroleum refining and the aluminum sectors perceived as critical for the EU s industrial value chain Industrial Renaissance Communication (EU Commission, January 2014) Refining Forum: EU Commission a platform to discuss state of EU refining with Member States, Industry and other key stakeholders. First Forum: 12th April 2013. Second Forum: 27th November 2013 Third Forum : in preparation 20
Conclusions 21
Current and impending environmental and climate legislation create additional burden for EU refining. Fuel Quality Directive Renewables energy directive Infrastructure for clean transport Middle Distillate Demand//trade impact Vehicle emission reduction Greenhouse gas in Marine and Aviation 22
Conclusion: the EU Refining sector is still under significant pressure Oil products will still be needed in EU economy for decades to come. Refining plays an vital role in secure and cost effective EU supplies. Combination of external competition and EU legislative burden are major problems for the industry. Despite major investments in recent years to meet legislation, EU Refining industry faces further massive investment to remain competitive. Competitiveness Climate Change - Sustainability EU Energy &Climate Policy Security of Supply The Bottom line. If EU is to retain a competitive refining sector it needs realistic policies, with a better balance between industrial competitiveness and energy, climate and environmental goals. 23
Thank you for your attention Discover how oil is Fuelling Europe s Future www.fuellingeuropesfuture.com You may be surprised! 24