The biggest problem facing refiners is not ever-tightening emissions rules but trying to guess the auto industry's requirements for future transportation fuels.
This is what Bernard Bulkin, director of environmental affairs at BP Oil International Ltd., told delegates attending a seminar held earlier this month in London by KBC Process Technology Ltd., Weybridge, U.K.
"The oil refining and marketing industry is in more trouble than we think," said Bulkin. "We think short term, seeing low margins, massive pressure to change fuel specifications, and large capital investment looming. We see intense competition in retailing and declining market shares and worry that Asia is not expected to bail us out in the short term. But these problems are merely business as usual."
Bulkin said that the legislative push for cleaner transportation fuels is technically feasible for refiners but while painful for many that cannot afford the investment. While anticipated changes to gasoline and diesel specifications may go partway in meeting the air quality and climate-change targets of legislators, the auto industry's moves to new fuels may make much refining investment irrelevant.
Alternate power sources
"The motor industry," said Bulkin, "is simultaneously advancing and promoting technologies along widely differing lines. Liquefied petroleum gas (LPG) and compressed natural gas (CNG) may play a large role."Vehicles fueled with LPG and CNG certainly address the air quality problems of many cities, said Bulkin. Gas-powered trucks are increasingly being used in public services, while gas is now being promoted for car fleets.
Meanwhile, a number of gas-to-liquids (GTL) process developments have been announced in the past 2 years, said Bulkin, with GTL-produced fuels being viewed favorably by Detroit and Stuttgart auto makers.
"Fuels from GTL plants have been provided for tests," said Bulkin, "and have produced outstanding results. One question is whether oil companies are going to make massive investments in Fischer-Tropsch technologies."
At the same time, said Bulkin, hardly a week goes by without the announcement of another fuel cell venture. He cited Toyota, Ford, and Daimler-Benz, among a growing number of auto manufacturers chasing fuel cell advances.
For fuel cells, there are a number of fuel choices: the final fuel is hydrogen, but it could be sourced from methane outside the car, from methanol carried onboard, and even from gasoline processed onboard.
"The implications for refining of any of these fuel cell technologies coming to pass are huge," said Bulkin. "Even if the fuel cell is run on gasoline, this fuel would be nothing like the gasoline we produce today."
And, while refineries are not configured to produce the type of gasoline expected to be required by fuel cells, demand for gasoline would decrease significantly.
Another up-and-coming technology is the hybrid vehicle, which can be powered typically by a combustion engine/fuel cell combination. Bulkin warned that this technology, and maybe others, could be only transitory, causing yet another planning headache for refiners.
On the positive side for the oil industry, Bulkin noted that electric vehicles sales in California, where legislation is pushing zero-emissions vehicles, have been poor: "Only 300 electric cars have been sold in 2 years, after a development program costing $6 billion, and despite a 20% price reduction."
While electric vehicles have struggled to become established, improvements are constantly being made, and several large automakers have major development programs.
And in the wings, said Bulkin, there are other contenders for future transport power sources, including the Stirling engine, small gas turbines, solar-powered units, and flywheels, all of which have proponents.
Bulkin noted that the end of the internal combustion engine was being flagged 25 years ago, but development of alternatives has reached the stage where significant change is likely to happen in the next 5 years.
He expects to see the use of natural gas as a transport fuel expand greatly in the near future, while for fuel cells the jury is "still out." Problems with fuel cells have not been solved, but there has been more progress in fuel cells in the last 5 years than in battery technology over 30 years.
Bulkin said that, in the next 2-3 years, he expects the auto industry to make a decision on which way fuel cell technology will be developed.
A complication
Bulkin said the public is dazed and confused by claims-often widely diverging-that are not backed up by sound science: "Some companies are doing what others say cannot be done."Bulkin pointed out a further problem, for refiners and the auto industry alike: "Market research has shown that, typically, 75% of people asked if they would buy an environmental product say "Yes," but only 6% will then actually buy it.
"They really want an environmental product to be: as good or better than the current product; a brand they trust; and available from the same location as the current product. If these three demands are not the case, then customers will not buy environmental products.
"This is good for our industry, but we must promote the efficacy of our own products. The environment is not first in the customer's mind; at best it is a tie-breaker."
Copyright 1998 Oil & Gas Journal. All Rights Reserved.
