In conversation with Mr. Mathew George, Former General Manager – Corporate Planning at Indian Oil Corporation Ltd., about Natural Gas being the bridge leading to and Hydrogen being one or more wheels in the Zero Emission chariot.
Net Zero emissions as per the pundits is a human survival imperative. Necessity is the mother of invention and somehow over the centuries, the human race has invented without failure whenever the necessity arose. So, I suspect Net Zero emissions are achievable; natural gas will be the bridge leading to it and I think hydrogen may be one or more of the wheels which bear the Zero Emission Chariot, renewables and nuclear being the other wheels.
How will electrification and decarbonization displace traditional transportation fuels and what will be the knock-on effects for refineries?
- Electrification & decarbonization mark a paradigm shift for refiners.
- Falling battery prices, policy support through programmes such as NEV Policy in China, ACC in California, subsidies, ICE bans pledged in over 17 countries for as early as 2025 in Norway, EU Fit for 55, pledges by automakers to go fossil fuel free launch of new models among other are driving the EV revolution especially in 2W & LDV space.
- Globally, transportation sector is currently highly reliant on refined petroleum products- gasoil, gasoline and ATF for air and more than 50% if final oil consumption is accounted for by transport.
- Out of the 100 mbpd oil demand a whopping 20 mbpd is accounted for by cars alone, where the momentum for electrification is the most. At home, India, 60% of our gasoline demand is account for by 2 wheelers where we are seeing have quickest shift towards electrification. Electrification therefore does pose a major threat and electrification of transport presents a real prospect of reduced market size in the future, poor refinery margins and refinery closures.
- In addition to this, given that fact that refinery sector is an emissions intensive sector accounting for 3% of global carbon emissions, sector is and will be facing increased pressure to decarbonize. Carbon tax in EU on emissions intensive sector will further pull down the profitability of the sector.
As governments around the world implement their electrification and decarbonization policies, what steps or strategies can refineries take to remain competitive?
- Petrochemicals integration: Petrochemicals demand is projected to continue growing in the next 3 to 4 decades at least. It makes sense for refiners to pursue PC integration for capturing both volume and value growth
- Biofuel Integration: Many oil and gas majors are investing in the biofuels business be it biodiesel, ethanol or biogas. The appeal comes from their low carbon footprint and being an indigenous resource. Just a few days ago Total announced the acquisition of Fonroche Biogaz, a major biogas producer in France. As regards, integrating biofuels in to refineries Eni and Total have converted some of their assets to produce biodiesel, ExxonMobil, Shell and BP produce biofuel alongside crude products in some refineries.
- Leveraging their expertise in conversion business- through chemical recycling of plastics, conversion of municipal solid waste
- Focusing on Efficiency improvements, improved operations using digitalization and shift to cleaner fuels
- Investment in Hydrogen & CCUS: After combustion hydrogen production from SMR is a major source of emission from refineries. Refineries are major consumers & producers of hydrogen currently, making these apt for taking on the drive towards blue (CCUS) and even green hydrogen.
One hears much about CCS, but what about the utilisation part of carbon so captured?
Carbon capture and storage (CCS) has long been seen as one technology with the potential to reduce GHG emissions significantly. The basic idea is to collect carbon dioxide gas and confine it underground. CCS hasn’t caught on, however, because it is expensive. But a new twist on the concept might change its cost profile. If carbon dioxide could be put to industrial use, the resulting revenues could make carbon capture financially viable.
A few industrial applications for captured carbon dioxide are already in play. One involves using the gas to make chemicals and plastics, such as polyurethane foams for seat cushions. Covestro, formerly Bayer Material Science, recently opened a plant that makes these foams from carbon dioxide. Research also suggests that making carbon fiber out of carbon dioxide gas would cost less than the typical production process, which uses polymers. However, the quantity of carbon dioxide that might eventually go into chemicals, plastics, and carbon fiber would be too small—between 40 million and 90 million metric tons per year—to make an appreciable dent in global GHG emissions. Methods of carbon capture and use (CCU) that take up much larger amounts of carbon dioxide gas will therefore be needed to help reduce overall GHG emissions.
Some new applications for captured carbon dioxide are being piloted; others are in the developmental stage. Three of these applications stand out for their potential to reduce emissions and generate revenue: fuel production, concrete enrichment, and power generation from super critical carbon dioxide. Experts estimate that carbon usage, driven largely by this trio of applications, could reduce annual GHG emissions by as much as one billion metric tons in 2030, compared with a scenario in which these applications do not develop quickly. Similarly, and theoretically bitumen can also be produced from captured carbon. All these processes are highly energy intensive, sometimes defeating the very purpose; however recent developments in catalysts augur well for process energy reduction.
What do you think of the electric vehicle drive in India?
While I completely agree that electrification of on road traffic is the need of the hour, I believe that greening of the power grid is even more important. The carbon intensity of electricity production in India is very high at 0.79 MT Co2/MWh of which transmission and distribution losses account for 20%. This makes the notional emissions from electric vehicles almost on a par with a modern gasoline vehicle. In fact Hybrids do better in the current Indian scenario in terms of CO2 emissions and the notional emissions from EV’s and Hybrids will only converge when the carbon intensity of electricity falls to somewhere around 0.53 MT Co2/MWh.
Given that majority of Indian power is coal derived, how would you see the greening of power going forward?
The coal sector is the most labour-intensive form of fossil fuel extraction, in India for instance, the sector employs a workforce of at least 2.6 million people. Net Zero transition along with industry wide changes such as automation of pose a real risk to jobs in the coal mining sector. Mine closures run the risk of causing deep and long-term impact on local communities, reducing economic activity, causing discontent among the people and social dislocation. In case of India, this risk is highly potent for the coal belt of India, where economic activity and employment is driven by the coal sector just as shift towards electrification of transport poses risks to automobile and refining sectors- important pillars of India’s manufacturing base.
Retrofitting coal plants with CCUS or the so called abated coal is the imperative for the region to walk the tightrope of more energy with less carbon, especially given that the fact that coal plants in much of the developing world are young, with average age in Asia at about 13 years. Natural gas penetration in the region trails the global average, but we know that India & China are targeting raising the share, here too the role of abated gas is important, thereby underscoring the role of CCUS.
Nuclear energy too could play a significant role in Asia’s energy transition. The 2011 earthquake and the subsequent Fukushima nuclear had been a watershed marking the retreat of nuclear energy . However, after a decade of being in abeyance nuclear energy is making a comeback. For instance, in Japan’s latest “Green Growth Strategy”, apart from Renewables, Nuclear energy is expected to make a comeback and play a vital role in decarbonization as it is expected to increase to at least 11% of the Total Energy Mix by 2030, up from 4% in 2019. The role of the new, easily deployable mini and micro reactors is also expected to be significant going forward.
While we hear a lot about green hydrogen, we do not hear quite as much about the pure water required to produce green hydrogen. What is your take on this issue?
It is true and indeed somewhat concerning that the conversation seems to be trapped around electrolysers, hydrogen supply chain and the electricity needed for green hydrogen production. In order to produce a ton of hydrogen, we need 9 tons of pure demineralised water in other words as much as 27 Tons of normal water. India is one of the most water stressed nations in the world with nearly 18% of the world’s population struggling to share just under 4% of the world’s water resources. Ground water exploitation has reached alarming levels, the monsoon is no longer trust worthy and geopolitics and consequent upper riparian disputes have the potential to disrupt our water offtake. Given these realities, I believe it is time for India to look at two other resources; treated sewage water from India’s megacities and desalination of sea water from India’s extensive coastline. Desalination is energy intensive and we may need to look at nuclear power in addition to renewables if this is to have any real meaning. To summarise, I feel strongly that it is high time to undertake conversations around water needs for the coming decades.
Given India’s vast landmass and the long-range supply chains which this entails, what do you think about goods transportation in India? How do you think this area will have to change in future given our net zero ambitions?
Well over 60% of India’s goods are moved by trucks, the most inefficient method of transportation from an emissions perspective. While intra-city small trucks have largely been converted to CNG, the long range inter-state trucks are still diesel driven and of relatively smaller capacities than in say the US, Europe of Canada. India’s logistics sector is largely unorganised and in the MSME sector, which is a good thing given the economics and demographics of India but not too good when it comes to adopting new technologies and achieving economies of scale. India needs multi-modal logistics, road, rail and water. To achieve true multi-modal capabilities we need containerisation of domestic goods movement. To achieve containerisation we may need some form of consolidation or at least shared digital platforms providing the needed access to the MSME sector. Transportation hubs with transhipment capabilities are the need of the hour.
Electrification or even hydrogenisation of trucks may need a tractor/trailer articulated vehicle concept where only the trailer travels long distances and the tractors travel short distances and return to their base, much like railway locomotives in India. It is my opinion that now may be the time to float an electric trucking company in India. Such a company is bound to get support from FMCG majors and other big companies looking to decarbonise their supply chains. However, infrastructure is the key, containerisation is a must and truck parks with charging and other facilities are a pre-requisite.
Mr. Mathew George
Former General Manager – Corporate Planning
Indian Oil Corporation Ltd.
Mr. Mathew George recently retired as as General Manager (Corporate Planning), IndianOil, Corporate HQ, New Delhi. A Mechanical Engineer by qualification, Mathew has done Post-Graduation in Finance from XLRI and a Post Graduate Diploma in Brand Management from UK’s Ashridge Business School. He has attended Executive Development Program of Kellogg School of Management, Chicago, besides Exim Programme of Indian Institute of Foreign Trade, New Delhi. He is also a Fellow of the Institution of Engineers, India (FIE) and a Member of the Aeronautical Society of India (MAeSI).
Mr. George has held various key assignments in Indian Oil, having worked in the Aviation, Technical Services, Lubricants and Petrochemicals departments at various locations. He was a founding member of IndianOil’s subsidiary, Lanka IOC, in Colombo, Sri Lanka. Moving back to India in 2004 as part of the Core Team involved in setting up IndianOil’s fledgling Petrochemicals Business, he was instrumental in a long-term cooperation agreement with Unilever which took IndianOil’s Propel Brand Petrochemicals onto an international platform.
Mathew was the founding member of IndianOil’s Petrochemical Exports Group. He also spearheaded the Core Team involved in development and implementation of the award winning, Customer Facing, CRM, Portal and Dealer Management platform for the Polymers Business of IOCL besides conceptualizing the Supply Chain, Pricing, Business Processes and Risk Management systems for this large business. A well-known supply chain and ERP/CRM expert and analyst, Mathew also has core experience in Ship Chartering for Chemicals and Petroleum. In recent years Mathew has been working on charting the future for IOCL, looking at strategic planning initiatives in the field of renewables, bio-fuels, electric mobility etc.
A licensed pilot and trained pianist, Mathew is a regular speaker/lecturer at international events and training courses on the subject of Petroleum, Natural Gas, Petrochemicals, International Trade, Information Technology, Cultural Sensitivity and Shipping & Logistics. Mathew is also an advisor/committee member on various Govt Panels in the areas of Petroleum, Petrochemicals, Supply Chain and IT.
Mathew speaks 6 languages, has lived/worked in 19 cities worldwide and has visited 48 countries on all continents.About InfEneTy
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