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Building and Maintaining Strategic Agility for Refiners in
a Rapidly Changing Energy Ecosystem
Presented by :
Dr Purandar Chakravarty
VP & Head – Innovation and Alternate Energy
Nayara Energy Limited
Table of Contents
2
▪ Why Energy is Important?
▪ How has Energy Sources Evolved with time? .
▪ What will Drive India’s Energy Future?
▪ Can Refiners prepare for the Unseen? A case study
▪ How can Refiners gear up for upcoming change in energy
industry?
▪ Path Forward and Conclusion
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 2015 2018
0
10
20
30
40
50
60
70
80
90
World GDP (USD Trillion) - Lt. Axis World Energy Consumption (mtoe) - Rt Axis
Wo
rld
GD
P (
US
D
Wo
rld
En
ergy
Consu
mpti
on (
mto
e)
3Source : World Bank, BP Statistics 2018, Our world in Data
Correlation = 55%
The increasing prosperity of the developing world such as India and China will be a key force for shaping
economic and energy trends over the next 25 years
Fossil Fuels
or
Hydrocarbons
Crude Oil (34%)
Coal (29%)
Natural Gas (21%)
Common Sources of Energy
(84%)
Energy is a fundamental need of the human society and is crucial for economic development
World GDP Growth and Energy Consumption
▪ Energy is the backbone of industrialization
▪ Serves as an input for nearly all goods and services
▪ Creates direct and indirect jobs for millions
▪ Serves as an input for nearly all goods and services
▪ Improve living standards
▪ Improve national security
Why do we need energy?
Currently, Hydrocarbons constitute almost 63% of world’s energy source
How has Energy Sources Evolved with time?
4
Source : BP Statistical Review of World Energy
0
20,000
40,000
60,000
80,000
1,00,000
1,20,000
1,40,000
1,60,000
1900 1968 1978 1988 1998 2008
Crude Oil Coal Natural Gas Biofuels Renewables
Transition
to engine
based
transportati
on and
electricity
driven
utility ~
coal and oil
demand
soared
Rise in standard of
living, especially in the
Western countries
Rapid industrialization
in China
Growth of renewables,
focus on clean and
efficient energy
FASTER CHANGE OF PACE
Global Primary Energy Consumption (TWH)
The pace of growth among different sources of energy
has changed faster in the last decade, thereby changing
the global energy mix.
This is mainly due to:
1. The growth of renewables~ where resources do not
have to be burned for energy generation is a
growing trend grabbing lot of attention.
2. Smart appliances with energy efficient
technologies are becoming popular, thereby
reducing energy intensity.
3. Government initiatives on cleaner fuel and on
emission challenge plus ban of plastics, diesel cars
etc.
Transition of Energy from a Fossil fuel era to a cleaner
Low-Carbon era
What will shape and drive India’s energy future?
5
The ability to secure sufficient, cleaner and economically available energy sources to support growth will be a
game-changer in India’s energy future
Demand Growth
Supply Challenges
Environmental Impacts
Security of Energy supply
▪ GDP and Population growth
▪ Higher rate of urbanisation
▪ Higher growth of middle-class
▪ Local pollution levels
▪ Climate change
▪ Abundance of economically
available resources
▪ Development of non-renewables
▪ Location of energy resource
▪ Geopolitical threats
▪ Import dependency
Can Indian Refiners prepare for the Unexpected?
6
▪ Aligned with the governments vision of increasing
energy efficiency and supply, Indian refiners have
invested a total of Rs. 3.5 Lakh Crore for setting up
secondary Coking units for producing higher volumes
of clean lower emission fuel products (MS and HSD)
▪ As a result, MS and HSD yields have increased by 5%
and 4% respectively from FY08 to FY19 ~ critical in
meeting growing product demand of the country.
▪ However, the viability of these units depend on the
availability of cheaper heavy crude oil which was
abundant 10 years back.
▪ However, now the situation is exactly the opposite
Coker capacity additions during 2009-2019 and proposed (in MMTPA)
MS and HSD Refinery Yield (as a % of Refinery Throughput)
A case study: Development of Indian complex refining industry
Case study…continued
7
Source: ENI World Oil Review 2018
40
11
44
8
0
10
20
30
40
50
Light Crude and NGLS Heavy Crude Oil
2017 Current+4 mb/d
-3 mb/d
NGL's
14%
Light28%
Medium46%
Heavy
12%
Growing Pie
on US Light Crude Oil
Reducing Production from Venezueala, Mexico and Iran
Challenging times for Indian complex refiners:
Market conditions have drastically changed in the recent time as heavy crudes supply became limited and expensive due
to US sanctions on Iran and Venezuela ~ and a possibility of throughput cut and less supply might be on the
Possible Alternate Solution:
Running Heavy feedstock (straight run fuel oil)
could provide critical alternative for heavy crude
oil for Indian refiners and partially contribute in
attaining 10% crude oil import reduction target of
Indian government by 2021.
Limiting Factor:
1. Present GST of 18% limits impeding stream
sharing between the refineries
2. Import duty of 5% makes it expensive to
source fuel oil internationally.
Global Liquid Oil Production by Quality
How can Refiners gear up for upcoming change in energy industry?
8
Source : World Bank, BP Statistics 2018
1. Upgrading Refinery Processes to comply with latest Fuel Standards BS VI
9* Corporate Average Fuel Efficiency
Refineries in India have invested close to Rs. 30,000 Crore* to comply with the government’s 'Auto Fuel & Vision Policy 2025' to supply
world’s cleanest fuel BS VI in India from 2020
Properties in BS standard Fuels2010
BS IV
2020
BS VIHighlights*
Sulphur (% in Fuel) 0.005 0.001 80% Reduction
CO 1.5 1 72% Reduction
HC 0.46 0.1 50% Reduction
Particulate Matter PM (g/Km) 0.02 0.0045 89% Reduction
NOx (g/Km) 3.5 0.06
Source: ARAI, For Gasoline based PV and LCH * As Compared to BS VI
0 10 20 30 40
China
EU
US
India
Expected Increase in efficiency in
L/100 km (%)
2025
2020113
103
0
50
100
150
200
250
2018 2020 2022 2025
CO2 Emissions (gm/km)India
EU
USA
Development in Indian CAFE Norms: Impact and Adaptation
Key Benefits of shifting to BS VI from BS VI
▪ To bring down emission levels from petrol and diesel
vehicles by almost 50% through curbing particulate
matter
▪ Put India at par with global standards adopted by
developed countries.
▪ India has proposed CAFÉ Norms to bring down CO2 emissions to
103 gm/km by 2022 and increase mileage by 10% by 2021.
▪ This latest development in Fuel Standards and ICE engines puts
emission levels of petrol/diesel cars at par with that of EV’s in India.
EMISSION INDEX OF ICE VS EV IN INDIA
Car Type
Fuel
Efficiency
(km/litre)
Emission factor
CO2 kg/Litre
CO2 kg/kWh
Emissions
(CO2e
kg/10,000
km)
Emission
Factor
(emission per
km)
Emission
Index (Petrol
Car =1)
Petrol Car 12 2.38 1983 0.198 1.00
Diesel Car 18 2.65 1474 0.147 0.74
BEV * 6.6 0.96 1455 0.146 0.73
*With 45 kW battery. Includes all source of power plants – new and old coal based and renewables.
10
2. Look at Alternate Energy Sources: Going the Renewables way
According to BP’s 2018 Energy Outlook, renewable energy will be the fastest growing source
of energy – increasing 5X by 2040 and provide 14% of global primary energy.
For any oil major, the way forward in renewables space remains grounded on:
Global energy growth by fuel (Billion toe)
Weighing renewables
against oil and gas
developments
Value Proposition
Allocating capital
considering the risk-return
profile
Capital Allocation
Exact timing market entry and transition
Timing
Corporate sustainability
Policy pressures
▪ Created ‘New Energies’ division for
energy diversification strategy
▪ Investment: $ 1-2 billion/year
▪ 2017- Acquired EU’s largest electric
vehicle charging company
▪ 2018- LT power purchase agreement
with British Solar Renewables
▪ Developing carbon capture and storage
(CCS) technology- owns 1/3 world’s
CCS capacity
▪ Invested in advanced Biofuels research
▪ Investment and participation is research
programs in leading US universities.
▪ Investment of $500 million/year in
renewables.
▪ Focus on Biofuels and Solar Photovoltaics
▪ 60% acquisition in US solar company
▪ Purchased French battery manufacturer Saft
for $1.1 billion.
▪ Total Venture Capital Arm invested $200
million in innovative start-ups.
Source: BP Energy Outlook 2018
3. Embrace New Technology and Market: Crude to Chemicals
11
While demand for oil may decline in the years to
come, the market for petrochemicals is poised for
high demand growth.
In India, the Petrochemicals is expected to grow by
8-10% annually in the next few years driven by:
Crude to Chemical is the new paradigm in the
refining industry globally.
Globally, refineries are investing heavily in research
for:
▪ Unravelling chemistry behind crude oil
composition
▪ Finding optimal and shortest processes to
manufacture chemicals directly from crude
~from the regular 8% to 12%, up to 50%.
▪ Expanding applications of crude oil
▪ Strengthen product portfolio
▪ Improving value chain
▪ Make investments for upgradation
▪ Higher profitability margins
▪ Increased flexibility
Global Examples of Crude to Chemical Projects
Exxon Mobil,
Singapore
2014: Steam cracker producing ethylene
directly from crude oil
China 2019: PX complex in Hengli that converts
crude to PX and Benzene. 40% conversion.
Aramco-Chevron
Lummus Global
Increasing Yanbu’s existing 45% conversion
with advanced technologies (Thermal Crude
to Chemicals TC2C) to yield conversion rate
of 70-80%
Source: Saudi Aramco, ICIS
4. Creating a circular economy: Convert plastics to fuel
12
Plastics to Fuel:
▪ Using pyrolysis technology to convert non-recycled plastics into
low sulfur diesel
▪ Recover clean energy from plastics that cannot be recycled.
How does the process work?
Fuel (Naphtha,
Petrol, Diesel)
Petrochemicals /Plastics
Non-Recyclable
Plastics
Low Sulphur Fuel
Crude Oil
Refining Cracking
End user consumption
Pyrolysis
(Heating in absence of oxygen)
Transport Fuels, Feedstock
Commercial attempts to use pyrolysis to make fuel from plastics
Vadxx Energy, Ohio, US
2009
23,000 TPY plant. Continuous pyrolysis technology
converting non-recyclable plastic waste into
naphtha, LS diesel and lubes.
Constraints:
Sorting and pre-treating waste plastic makes it
expensive
Securing long-term feedstock supply from
municipalities and waste management company.
Plastic Energy (Spain )
2012
Pyrolysis of waste plastic into diesel, kerosene, and
naphta; uses mixed plastic and claims production
costs of $1.00/gal including pre-processing but
excluding feedstock cost.
R&D partnership with the University of
Loughborough (UK)
Currently working on optimizing its technology to
process a wider range of plastic feedstock
Source: Lux Research
5. Investing in Digitalization of Refineries
13
“Data is the new Oil”- Clive Humby (Mathematician, Data Scientist, Leicester UK)
For years, refineries have been digitalizing processes in efforts to reduce expenses, boost margins and stay ahead of the competition.
However, leveraging latest technologies such as IoT, Big Data, Blockchain and AI has the power to transform the way they operate and
function.
Algorithm to interpret data autonomously for generating insights
Seamless integration of Machine learning and AI with plant operations can increase efficiency through IoT
inputs can:
▪ Predict the time of critical equipment failures, understand why they will fail and prescribes preventive
action to avoid failure.
▪ Increase throughputs up to 3-5% and reduce maintenance cost by almost 10% - which can save
refineries millions
Big Data
Machine Learning
Artificial Intelligence
Examples of Big Data and Machine Learning Application by oil/gas/petchem companies
Repsol with Google Cloud Uses Big Data and artificial intelligence (AI) to optimize management of its 186 kbd
refining complex in Spain. This involves more than 400 variables and have a potential to
add 30 cents/bbl to GRM ~ $20 M/year
BOREALIS with Aspen MTell Reduced unplanned downtime for LDPE production by detecting incidents with 30-50 days
notice
5. Investing in Digitalization of Refineries (Continued..)
14
Blockchain for managing complex downstream supply chain management, trading and counterparty information
Blockchain provides new level of transparency in ownership exchange and connects stakeholders directly by removing intermediaries.
▪ Efficient spare part management by prevention of creating fake documents (fabricated certificated and insurance documents)
▪ Securing and simplifying billing and payments – Creating Smart contracts, automate payments and improve credit.
▪ Blockchain based system to monitor quality control issues of all products
▪ Increased efficiency in Energy Trading and Risk management through lower transaction times.
▪ Manage pipelines inspection through real time data and storing worker certifications.
▪ Automated regulatory reporting for regulation and compliance.
BP, Royal Dutch Shell, Statoil ASA are currently in the process of developing a blockchain platform to record all oil trades.
BLOCKCHAIN
The awareness and preparedness to have a flexible profile is the key to
remain dynamic in a fast changing energy environment.
Path Forward: Agility at the Core
15
▪ Even though we believe that hydrocarbons will dominate the energy sector in the near future, a transformation in the
energy spectrum towards a low-carbon economy is bound to come in the next 10-20 years.
▪ Geopolitics of global oil supply has also become a source of disruption for refiners.
▪ A tremendous amount of effort is going into R&D and innovation across all energy segments and there is no saying
in when we see the next game changer.
▪ While refiners continue being strong in providing fuel to the nation; it is time that they take a structured approach
and create a stable backbone to remain agile in the changing face of energy markets by:
▪ Embracing the transition of energy
▪ Evaluate and invest in alternate sources of energy
▪ Invest in new technologies (Crude to chemicals, Plastic to Fuels, Plastics to Hydrogen)
▪ Integration to high growth sector such as petrochemicals, shared mobility etc.
▪ Digitilization for improving performance and competitive edge.
Thank you!
16
Dr. Purandar Chakravarty
VP & Head – Innovation & Alternate EnergyNAYARA ENERGY Ltd.
Mumbai – 400 051 | INDIAT +91 – 98197 30790
E-mail : [email protected] us : nayaraenergy.com
LinkedIn: https://in.linkedin.com/in/purandarchakravarty
