< PreviousFrom a global perspective, the US energy market had already begun its decarbonisation journey with the election of President Biden. President Biden’s transformative goal of achieving net zero in the power sector by 2035 and the broader economy by 2050 has unquestionably accelerated the transition. But what does this mean for the energy transition in the rest of the world? Do we have the right market mechanisms? What is the European Commission’s plan? Moreover, with all these policy announcements, are they aligned, supportive, or in competition? On the 14th of July 2021, the European Commission presented 13 policy measures to reduce greenhouse gas emissions by 55% in 2030, from their 1990 levels. Achieving these emission reductions in the next decade is crucial to Europe becoming the world’s fi rst climate-neutral continent by 2050 and making the European Green Deal a reality. The recently announced and much anticipated Fitfor55 legislation is encouraging the transition in transportation. Rigorous standards regarding CO2 emissions from new cars will be applied. By 2030, manufacturers will have to reduce emissions from new vehicles by 55% compared to a current target of 37.5%. And by 2035, emissions from new vehicles will have to be reduced by 100%, which might open the market for electric and hydrogen cars. The reform of the emissions trading system (ETS-EU) is also at the heart of the “Fit for 55” plan. The European Commission has proposed phasing out exemptions enjoyed by the aviation sector in the emissions trading system (ETS), and also the integration of maritime transport into the system ETM. Looking at the Middle East, how is the region positioned to address the energy transition? We have heard about the recent achievement in Saudi Arabia where the G20 Energy Ministers endorsed the Circular Carbon Economy Platform (CCE) as a tool to manage emissions and foster access to energy. The CCE approach includes a holistic, integrated, inclusive, and pragmatic approach to managing emissions that aims to provide new pathways towards economic growth. In addition, the Saudi and Middle East Green Initiative, was announced as a valuable contribution to tackling the worldwide energy transition. The initiatives include several ambitious projects designed to reduce carbon emissions in the region by 60%. Downstream will be key to delivering the energy transition with opportunities arising, for example, the move to EVs increases the demand for manufacturing plastics, which in turn increases demand for heavier grades such as carbon black and anode grade coke used for manufacturing materials required in batteries. The Middle East needs to examine the product slate and deliver more fl exible products as the region is in an ideal position for global competitiveness due to less and less assets operating in Europe as we get close to 2035 and 2050 timeframes so refi neries need to make the most of this and position themselves well. The region is blessed with the abundance of resources with big opportunities such as solar and wind. In terms of regulations, it has been commented that more drive is needed and more support. We have seen companies setting their own targets and agendas meaning the sustainability goals are not unifi ed. Regulation has the potential to give consistency, incentives and guidance to all involved and deliver a common goal to achieve together to meet regulatory requirements. On the other side, policy is developing too slowly and industry needs to act now to support the development of technologies through collaboration on pilot plants and scale up of investment in capital to ensure the solution deployed in the future is as cost eff ective as possible whilst setting targets and a roadmap to meet the 2050 goals. Any regulation that will be implemented will reinforce the strategy set by the industry, rather than drive it. If the region waits, it Sonia Sanchez (Conference Executive) and Stefan Chapman (Vice President) at Euro Petroleum Consultants (EPC). EPC is a technical oil and gas consultancy with offi ces in Dubai, London, Moscow, Sofi a, and Kuala Lumpur, as well as organisers of leading conferences worldwide in- cluding Energy & Sustainability Forums (ESF) - high-level forums designed to support the discussions and development of a sustainable energy fu- ture in which the downstream industry plays a leading role. EURO PETROLEUM CONSULTANTS Europe is leading the way in the push from hydrocarbons to any energy that can provide lower carbon with the world overall becoming more environmentally cautious and greener, comment Stefan Chapman and Sonia Sanchez Net Zero Pathways and Policies: Defi ning and Driving a Global Level Playing Field 10 Opinion Refi ning & Petrochemicals Middle East November 2021www.refi ningandpetrochemicalsme.comenough. The reality is that the technology is not suffi ciently ready to develop the projects. With the ever-increasing companies’ commitment to carbon neutrality, there is a growing concern about the accessibility and availability of renewable and bio feedstocks. Clearly a balance is needed but what remains are concerns and constraints about the availability of appropriate feedstock. That segues into circularity and the challenge of how to convert waste into value. Today only 8% of the economy is circular. With such expectations from stakeholders on Scope 3, how can we get more of our products/services to be circular? Innovation, regulation, integration, and infrastructure are all needed to ensure that waste becomes a valuable material that comes back into the chain. There is a big innovation challenge for the whole industry to make these technologies scalable and aff ordable especially to be successful by 2050. Whilst there are issues regarding the scalability of technologies it is believed that the industry will get there but the supply chains still need establishing. Looking back to the history of the integrated business model, rather securing access to the crude stream, today’s refi ners and petrochemical producers need secure reliable access to alternative feedstocks, which might mean partnering with others, such as with municipal waste companies for example. The decarbonisation challenges for the refi ning industry and those producing fuels can be split into three main categories. First the manufacturing and production of fuels, the refi nery, the plant, and the systems around it. Second, the fuels and products themselves, needing to be decarbonised and third and perhaps the most crucial, the innovations, infrastructure, and the regulations that will enable the fi rst two to be delivered in a commercially viable manner. To stay relevant, there is no option for the industry but to move forward with the transition, but crucially, the industry should be enabled and supported to move as fast as they can, in the (technology) direction that’s best for them and society. Energy Transition should be seen as a journey with many steps. Cooperation and collaboration are needed between diff erent sources of energy and the many opportunities available today must be embraced in parallel. will end up behind the curve and the overall solution will end up costing more. Europe is leading the way in the push from hydrocarbons to any energy that can provide lower carbon with the world overall becoming more environmentally cautious over the last year. One of the most talked about alternatives is Hydrogen. This has been at the forefront of many discussions and debates. “In the transition phase we will need all low-carbon hydrogen solutions,” said EU Energy Commissioner Kadri Simson at the launch of ‘Fit for 55’. Hydrogen has been very present in the European energy scene these past few years. Hydrogen can help decarbonise heavy industry and long- distance transport – aviation, shipping and trucks, and to store wind and solar power. Whether be it green or blue hydrogen, of course green hydrogen is the preferred route, but members of the commission also see a transition role for blue hydrogen made from natural gas with carbon capture and storage (CCS). Although blue hydrogen will limit our abilities to reach the target ambitions, but the reality is that until there is enough renewable power for the electrifi cation of crackers or until the development of a non- energy intensive route to produce olefi ns, blue hydrogen is an already proven key mechanism to allow the industry to reduce its emissions consistent with the required timelines. Across Europe’s 40 crackers the technology at scale is available today to convert 40 million tonnes of CO2. Blue hydrogen is a key pathway that needs acceptance to achieve this transition. It was suggested that the use of blue hydrogen be limited to certain sectors for example, the cement industry and refi ning. Clear boundaries and annual allowances for blue hydrogen can be set during this transition period which can be reviewed, reassessed, and displaced by green as/when the capex for electrolysers comes down, more renewable feedstocks are readily available, and the cost of renewable electricity has come down. It was suggested that from a policy perspective, blue hydrogen needs supporting, but only green hydrogen as the end goal should be funded. UK industrial cluster says blue hydrogen is now needed to reach net-zero goals in the future. These industrial areas that are traditionally reliant on fossil fuels are in competition for funding to help create the world’s fi rst net-zero carbon industrial cluster by 2040. At Essar’s Stanlow refi nery, part of the UK’s leading industrial decarbonisation cluster, HyNet Northwest, the production of low carbon hydrogen will help decarbonize 40% of the site where CO2 emissions currently stand at around 40 million tonnes per year. The fi rst stage will remove 300,000 tonnes. CO2 capture is a key part, and the fi rst wave of hydrogen production will see 97% of the CO2 captured. Subsequent units will use natural gas from the grid. HyNet is enabling closer integration between industries in the UK’s Northwest with a common focus of reducing collective carbon emissions. HyNet is about using established technologies in a new way, with effi ciency at the core. However, it can be agreed that there is a lack of coherency in the regulations that are currently on the table. Looking at the diff erent sector roadmaps and regulations, be it Fitfor55, Fuel Exempt, or the Waste Framework Directive, they are not connected in their objectives. Consequently, one of the most diffi cult challenges for the European downstream players is that the legislation in Europe is not developing consistently and coherently. Adding to that, what we are seeing today is that the development of regulations is faster than the deployment of capital expenditure for projects to enable the industry to satisfy the regulation. The industry needs the time to build the technologies, capabilities, and competitiveness to succeed in these pathways, and there is a danger that the industry is not seen to be moving fast Hydrogen has been very present in the European energy scene these past few years and it has the ability to help in decarbonise heavy industry and long- distance transport – aviation, shipping and trucks, and to store wind and solar power. 11Opinion Refi ning & Petrochemicals Middle East November 2021www.refi ningandpetrochemicalsme.comTECH-DRIVEN CHANGE BRACING FOR Recent technology developments in petrochemicals industry, as a result of decades of research & development efforts, could completely revolutionise the industry 12 www.refi ningandpetrochemicalsme.com Cover Story Refi ning & Petrochemicals Middle East November 2021 12 www.refi ningandpetrochemicalsme.com Cover Story13 www.refi ningandpetrochemicalsme.com Cover Story Refi ning & Petrochemicals Middle East November 2021 13 www.refi ningandpetrochemicalsme.com Cover StoryGlobal petrochemical markets are entering a new decade with vast opportunities as well as challenges ahead. The importance of petrochemicals, which is already a major component of the global energy system, in our lives can be gauged from the fact that its production growth rate has outpaced that of all other bulk materials (such as steel, aluminium or cement), and has nearly doubled since 2000, according to a report by International Energy Agency (IEA). Industry insiders are predicting that soon petrochemicals are set to account for over a third of the growth in oil demand to 2030, and nearly half to 2050, ahead of trucks, aviation and shipping. Petrochemicals are also poised to consume an additional 56 billion cubic metres of natural gas by 2030, equivalent to about half of Canada’s total gas consumption today. While the demand for petrochemical products is growing rapidly, the industry is also facing increased pressure from environmental and other pressure groups to cut emissions, develop products that are less harmful to the environment. The industry is responding to this challenge by adopting newer technologies to cut emission and are also working on new processes to improve effi ciency while continuously looking for newer products to maximise return on investments. New technologies As a result of the higher spending by the downstream industry to meet increasingly stringent environmental and general regulations, new processes and technologies are emerging from the lab to ensure profi tability in the sector while meeting regulatory standards. “One of the key trends visible is that the petrochemical industry is bracing itself for a rapid change. They are adopting means and ways to minimise the environmental impact,” says Bart Cornelissen, energy, resources & industrials leader, Middle East, Deloitte Middle East. Besides this the industry is also drifting towards using more and more renewable resources to cut emissions, many have started using solar energy to generate electricity and heat while some are focusing more on the wind, Cornelissen said. Clean energy technology is becoming a major new area for deployments for the petrochemical industry and the companies 14 Refi ning & Petrochemicals Middle East November 2021www.refi ningandpetrochemicalsme.com Cover Storyshift towards using green hydrogen and recently some large companies have announced mega projects to capture hydrogen. Cornelissen said increasing usage of hydrogen in the industrial process is a clear trend, going forward the usage of hydrogen is expected to rise further as the downstream petrochemical industry seeks to realise more value. According to a report by GlobalData, the global capacity for hydrogen production from renewable energy or natural gas with carbon capture could increase by over 20 times reaching 14 million tonnes per annum by 2030. The chemical industry is the largest producer and consumer of hydrogen. Hydrogen has various applications in the chemical industry. However, by far the most dominant processes are the production of ammonia and methanol. Given the high energy intensity of the petrochemical industry, hydrogen could therefore play a key role in the decarbonisation of the petrochemical industry if it is cost- competitive and provided from emission-free production processes Rotating olefi n cracker technology As per industry insider decarbonization through disruptive rotating olefi n cracker technology is one such process, which is getting industry attraction and can emerge as a disruptive technology. The Rotating Olefi ns Cracker (ROC) technology employs a dynamic reactor system that replaces conventional furnaces used for pyrolysis when manufacturing light olefi ns – the building blocks for chemical products used in everyday materials, from packaging to polymers. The technology off ers driver fl exibility, and when driven by electric-powered motors or hydrogen-fi red gas turbines, the technology leads the path to decarbonize the process used to produce light olefi ns. The decarbonization impact is even more signifi cant when the electric power or hydrogen fuel is derived from renewable sources. The ROC process, once fully commercialized, is also expected to have better fi rst pass olefi ns yields with similar operating costs compared to the currently commercially available technologies. Utilization of carbon capture technologies in the petrochemical processes Carbon capture, utilisation and storage (CCUS) technologies are set to play an important role in supporting clean energy transitions within the petrochemical industry. Carbon capture technologies provide solutions for heavy industry that are cost- competitive, readily scalable and secure, and they can help the region to meet its growing power needs while limiting emissions. Experts predict the hub approach can enable CO2 capture from multiple industrial and power facilities and promote greater effi ciencies in the planning and construction of capital-intensive transport and storage infrastructure. Separating capture from the transport and storage elements of the CCUS supply chain can also facilitate dedicated business models for transport and storage, recognising that the specifi c skills and expertise needed for large-scale carbon management may not be available in most emissions-intensive sectors. Negative carbon-di-oxide impact for industrial-scale of direct air capture (DAC) In the DAC process, ambient air is captured, and the CO2 is separated from the air through a chemical separation process. Thereafter heat, vacuum, or some combination is applied to the system, producing high-purity carbon-di-oxide, which can be easily condensed through are making signifi cant investments in cutting energy usage in the industry to increase profi ts while meeting regulations. “Innovation is a fundamental part of Siemens Energy’s strategy to energize society and be a decarbonization leader,” says Thorbjörn Fors, Executive Vice President of Industrial Applications at Siemens Energy. “Working with our partners and customers to improve effi ciency and develop new technologies for the downstream sector is vital to decarbonizing industry,” he says. Hydrogen is gaining importance Globally petrochemical and downstream industries are using more and more hydrogen. However, over the past few years, there is a Thorbjörn Fors, Executive Vice President of Industrial Applications at Siemens Energy. 15 Refi ning & Petrochemicals Middle East November 2021www.refi ningandpetrochemicalsme.com Cover StoryA plant enabled by IoT is equipped with a combination of sensors, automation systems and cloud-based technologies that are integrated with its current systems and data analytics capabilities. Streaming data from sensors and instruments enables plant operators to quickly assess current conditions and identify warning signs for abnormal operations. “There is no doubt, advanced IT solutions bring extra value and advantages to operating processes and help with the development of up-to-date instruments and going forward, we are going to see increasing usage of digital tools,” says Cornelissen. Globally, industrial companies are currently involved in transforming the oil and gas business into a digital-based and excellence-driven process system. Digital transformation of downstream and refi nery operations will bring tremendous changes in the industry be it operational excellence, improvement in plant availability and uptime, increasing in plant effi ciency, from an energy, materials and emissions viewpoint along with a signifi cant increase in productivity. Utilising technology such as hybrid models, closed-loop production optimisation, and predictive analytics are already helping downstream companies move toward their longer-term business objectives, such as monitoring asset-wide emissions and reducing energy use. compression, then transported and stored geologically or used commercially. Today’s DAC technologies that convert low-purity carbon-di-oxide to high purity are very energy-intensive, with thermal energy dominating over electric. Although the fuel market has the potential to be signifi cant, it should be noted that the approach involving carbon-di-oxide and hydrogen to synthetic fuels is at best neutral and is not very potentially benefi cial. Hence, this pathway will assist in avoiding emissions through the direct use of fossil fuels but will not be a route to permanently remove the already emitted carbon-di-oxide from the atmosphere. Direct air capture is still at a very nascent stage but considering that the fact that everyone is talking about reducing greenhouse gas emissions, there is a potential to become disruptive in near future, EIA said in its report. Digitalisation supported by Artifi cial Intelligence and machine learning Refi ning and petrochemical industries are increasingly exploring digital tools that take advantage of the emerging Internet of Things (IoT), as well as advanced software for data analysis that can optimise process operations and reduce downtime. Bart Cornelissen, energy, resources & industrials leader, Middle East, Deloitte Middle East. 16 Refi ning & Petrochemicals Middle East November 2021www.refi ningandpetrochemicalsme.com Cover StoryDRILL DEEPER The oil and gas sector is the heartbeat of Middle Eastern economies. Unlock OilandGasMiddleEast.com to keep your finger on the pulse Projects Empower your decision-making with timely updates about the latest upstream oil and gas projects in the Middle East. Events Take advantage of early bird access to be first in line for the industry-leading Middle East Energy Awards. Subscribe now to get every last drop of upstream insight from OilandGasMiddleEast.com, with exclusive benefits Lists Read our comprehensive annual rankings of the Middle East’s most powerful people and companies across upstream. Multimedia platforms Get insider information through our global webinars, podcasts, and video interviews with upstream leaders. Industry insight Get the story behind the headlines with in-depth analysis dissecting current events and the industry’s outlook. In-depth interviews Hear about the industry directly from oil and gas titans with in- depth interviews, features and multi-media. AN ITP MEDIA GROUP PUBLICATIONARAMCO’s IKTV program has generated employment for citizens. Localisation programmes in the GCC region are essentially a powerful mechanism for ensuring more economic value remains in the nations from the contracts awarded. Most conservative estimates suggest that over $100 billion funds will be injected into the region as a part of the state-mandated programmes, giving a much-needed thrust to local industries in the next fi ve years. Creating inhouse value 18 Refi ning & Petrochemicals Middle East November 2021www.refi ningandpetrochemicalsme.com In-Country ValueH E Dr Sultan Ahmed Al Jaber UAE Miniser of Industry and ADNOC CEO. T he GCC (Gulf Cooperation Council) governments have been directing their concentrated eff orts over the past few years to implement their respective localisation programmes, seen as a panacea to most of their socio-economic problems, to generate local employment. These localisation programmes are known by diff erent nomenclatures across GCC. In Saudi Arabia, it is known by In-Kingdom Total Value Add (IKTVA) Programme, which is primarily run by Aramco while a similar programme by Saudi Basic Industries Corp (SABIC) is known as Nusaned (which means localization in Arabic). In the UAE and Oman, similar programmes are known as In-Country Value (ICV). As per analysts and industry leaders programs such as ICV/IKTVA/Nusaned are specifi cally designed process to ensure that local economy and population should also benefi t from the extraction of natural resources and other such related activities. Authorities responsible for awarding contracts in the GCC region believe localisation pressures are likely to intensify competition among countries to attract and retain value-adding manufacturing fi rms ICV. Unique GCC characteristics GCC countries have unique characteristics, which is despite having signifi cant hydrocarbon resources and surplus capital availability, the region is struggling with the issue of local youth unemployment while at the same time they are heavily depending on foreign workforce. For instance, Oman was struggling to arrange employment for around 60,000 young Omanis at a time when around two million foreign workers are employed in the Sultanate. It is interesting to note that despite having abundant hydrocarbon resources, the region’s petrochemical industry is overwhelmingly dependent on other countries to supply men and materials needed for exploring, producing, and refi ning them. Another major characteristic of the region’s petrochemicals industry is its strong reliance on international markets as a destination, with more than 80% of products being exported, according to Gulf Petrochemicals and Chemicals Association. Authorities have been pushing for localisation for a while, Oman started one such initiative in late 1970s, but a steep correction in global crude oil prices in late 2016 and later during mid-2020, when global demand for fuel plummeted as the government implemented lock-downs brought everything to a standstill, forcing authorities to accelerate localisation eff orts to streamline their troubled fi nances. There was also an urgent need to create more avenues for earnings to keep the cradle-to-grave welfare system, a hallmark of this region, intact while providing local youths with ample job opportunities. ADNOC ADNOC launched its In-Country Value (ICV) program in January 2018, mainly for its suppliers. This procurement-led initiative aims to boost ADNOC’s ICV contribution by focusing on local supplier 19 Refi ning & Petrochemicals Middle East November 2021www.refi ningandpetrochemicalsme.com In-Country ValueNext >