“We believe in net zero”: In conversation with Becht and Crossbridge
The concept of net zero (and achieving it) is on the horizon, but it’s by no means an overnight endeavour. Chris van der Beek, Becht’s Director of Europe, Middle East and Africa, and Matthew Drake, Director of Projects at Crossbridge, sit down with Asian Downstream Insights to discuss how projects aimed at reaching sustainability goals can get their wings off the ground.
Thank you very much for joining us here today, Chris and Matt! Let’s start by getting to know the both of you a little better.
Chris van der Beek
Happy to do that. My name is Chris van der Beek. I’m Dutch, living in the Netherlands, and leading the regional entity of Becht for Europe, Middle East and Africa. I’m trying to grow our business in this region, by building the brand, but also growing our existing clients and finding new clients.
I’m Matt Drake, I’m the Director of Asset Management for Crossbridge. My role is to help identify developers who are building new refineries and run them on their behalf. I also help private investment, private equity and other partners who are out there buying up existing assets; we help buy those and operate them ourselves, or operate those assets on another’s behalf. As you know, the industry is evolving. So our company’s one of the few out there that has the capability to run those with that for our customers.
Chris – I understand that Becht offers quite the range of services and solutions for the refining and petrochemicals industry. Could you tell us a little more about this?
Chris van der Beek
Yeah, so we also serve LNG gas facilities as well as power plants and petrochemical plants. And yeah, we have been growing our company for 57 years, providing engineering and plant services to our clients. So we help them with the development and execution of turnarounds and projects, the development of projects, as well as also the overall optimization of assets. So it’s indeed becoming very broad. And we’re also able to specifically help with some more complex problems. So the ones where you really need integrated teams and different disciplines, that’s where we’re strong. And we’re also very happy with this collaboration and joining up with Crossbridge.
Tell us a little more about this project and collaboration.
Crossbridge is a nascent company founded in roughly 2021, and is kind of the foremost authority of due diligence for acquisition. So let’s pretend you’re an investor, and you want to go buy a refinery, or buy an asset – Becht is typically the company you’d call and rely on to go in and send people in, to peel back the onion, so to speak. What steel is on the ground? What are the economics behind it? What makes sense?
We believe in net zero, we think it’s going to work… But our thoughts are that for the planes and trains, the things that aren’t going to be able to convert to electrical overnight, those transportation fuels are going to be needed and those refineries are still going to be needed. So why don’t we buy them and build carbon or decarbonisation assets around them? That’s what Crossbridge does; we buy an asset and then use the plot space around it to do green hydrogen projects or green ammonia pyrolysis oil, and we’ll co-finance it with partners in the industry that are able to do so.
Many developers in the space – people who are in technology that want to develop their own projects – have been struggling to fund projects, because they don’t have a reliable partner to operate them, and so they come to Crossbridge.
Crossbridge essentially launched an asset management group, so that when a developer wants to build a new renewable natural gas facility, or they want to build a specialized municipal solid waste plant, like a refinery that takes trash and turns it into pyrolysis oil or other products, and they struggle to find a reputable operator, they come to Crossbridge which provides the asset management group, and we use Becht as the headcount to help us run that asset because Becht has the reputable subject matter experts, the ex-operation managers.
And it’s a very seamless process, unique to the industry that we think provides us unique business value with Becht to help us achieve decarbonisation and the energy transition.
It’s interesting how you’ve mentioned coming up with new fuels – where do traditional fuels come into this, and is there a displacement the industry should be worried about?
Again, we believe net zero is achievable, but it’s not going to happen overnight, and a large amount of equipment, transportation fuels and other things aren’t going to transition overnight to these green dispositions. So the governments are subsidizing these efforts like woody biomass to biodiesel, woody biomass to sustainable aviation fuels, all of these product projects are happening, and we’re super excited, and Crossbridge and Becht are poised to be a part of those.
But if you look at the volume or the yield of products, for example, a woody biomass project, you’re talking a million tons per year of trees that can only go into about 2500 barrels per day, whereas a typical small-scale legacy refinery is anywhere from 7500 or 75,000, 200,000 barrels per day. So a 20th the size of production for the same amount of capital going into it, and the same amount of people moving the asset, turning valves and so on. We believe in this, but the volume of new molecules to displace the legacy petrochemical or crude oil refineries, it’s just not there yet. So, let’s subsidize these efforts with the governments to help get the technologies up to where they need to be. And then let’s decarbonize the assets that are currently on the ground.
Why can’t we develop projects in these existing refineries that are reliable and safe, and make them more green where possible? There’s where Crossbridge and Becht come into play – how can we help these developers run these new assets, and then scale those up? And then, how can we go to the assets that are currently still on the ground around the globe and help them build projects on site that produce a much more decarbonized fuel? Because you have to remember, the plans aren’t going to become electric overnight, all these other things that use these energy consumptions, they just won’t transition quick enough.
Chris van der Beek
I’d just like to add to that – so we help existing refineries increase their biofeed, to get a larger percentage of biofeed-linked fuels from the refinery – and the governments are looking to increase that percentage over time as well as to build new renewable plants. There are not so many new refineries being built, but there’s a lot of activity and changes in existing refineries and renewable projects.
One point we’ve heard you mention is that it’s not just about coming up with new refineries or building new refineries, but it’s also about retrofitting existing operations and technology. What are some challenges you may face in this regard?
I think I’ll give one example, and then Chris can give the other – but the low-hanging fruit we’ve seen most recently is co-processing, so introducing vegetable oil or other types of oils into the refinery that are green, to crack or to produce typical refined projects: distillates, like diesel, with jet fuel and things like that. It’s not that it’s not possible, it’s just that whenever you introduce a stream like that, that’s completely unique to the refinery, you’ll have to adjust the parameters of production to offset any concerns around the process. And there’s only so much of it that can go around, so it’s not cheap, and it’s not as available as people think. It requires a lot of due diligence to go out and gather it.
Chris van der Beek
As Matt said, this feed is now sometimes becoming a limitation, because there’s not enough of that feed available to grow as fast as we’d all like to see it grow.
Another opportunity that we support companies with is carbon capture – and then not storing it underground, but also finding opportunities to have it react with other components, there are valuable products or energy carriers that you can make. We see an increase in companies looking for what is the best strategy, and they are not secure, the technologies are not always well-developed, the support they get from the government is not always completely clear. We help them in this journey.
Let’s draw this to a general outlook of the industry; we’ve discussed the workforce, new technologies and new tools. But what in your opinion would be key concerns for refiners to take note of when it comes to the current state of the industry?
I think refiners are definitely looking at energy efficiency, and on the other hand is what the world calls the carbon index. Let’s go back 30 years – the cost of conversion then was the biggest lever, we had an industry to impact the economics of the plant. So how cheap can you buy the molecules, how safe can you run them without causing a lot of reliability on your plant, and then how efficiently can you distribute the products? That was key. And then over the decades, we started seeing a transition to where it mattered how much carbon you were producing, how much emissions, how much energy usage you had on the site.
The sites that are more pragmatic about this and are upfront about managing their emissions, I think, are going to be more successful moving forward in terms of being competitive because it just costs so much more in terms of emissions.
Chris van der Beek
Companies need to decide on their strategy, how to survive. And it can be by going for the best reliability and continuing as long as they can with their existing assets, and then either close them or convert them to terminals, which is what we see happening now as well. But there are other ways, and we’ve been buying refineries from major companies over time, and we have very high ambitions on being amongst the winners over time by investing in the energy transition and supplying these new fuels or energy carriers to the clients. So it’s a very interesting time for all of us, in this industry. So it’s very exciting.
Matt, you’ve talked about asset management. And we’ve talked about maximizing the efficiency of the plant in terms of startup and making sure that everything is running the way it should. How would you say, OPEX-wise, that priorities have shifted in the past couple of years for the industry?
A large amount of the spin, or the money that is dedicated to projects, are geared towards green projects: green ammonia, green hydrogen, blue ammonia, blue hydrogen, municipal solid waste, woody biomass… I mean, these are all the flavors the month. So when you’re investing in those projects, they require a large amount of environmental subsidies to make the plants profitable. And to do that, you have to have mechanisms in your plant design that monitor the efficiency and the carbon index of the site. Otherwise, you won’t be able to capture that carbon tax, that renewable feedstock credit, or that low carbon fuel standard – it depends on where the plant is.
But again, the governments are subsidizing the project. So unless you’re able to monitor it, you’re not going to be efficient enough to do it. So the project premise for these green projects that we’re a part of are tied to things like carbon intensity, where 30 years ago, all we ever knew was to run the plant wide open. Now, it might make sense to run the plant more efficiently and not 100% wide open so that you can hit the carbon intensity of the site.
So that’s a huge shift in terms of production, operational availability, which is a kind of index or measurement of how much you’re running the plant against what its nameplate capacity is. Now it’s you know, the energy efficiency index and carbon intensity are just as important. Because for an energy project, like a municipal solid waste, or woody biomass project, 80% of the product value is tied to the environmental credits, which is huge. So, in that case, it makes sense.
Alright, now the million-dollar question: Is the energy transition here to stay, and what should organisations do to adapt?
Yes it is.
Consumer commodities (transportation fuels, ammonia, ethylene etc.) are not going away overnight because people are buying electric vehicles. We also know the third world will transition much slower than the rest of the world. The data proves that we must push towards decarbonization whether we like it or not.
All producers know they will have to decarbonize to stay competitive and be sustainable. The question is “how fast”. Net zero is the goal but that is not realistic next year or the year after that. The top companies will look at ways to attack low-hanging fruit now and scale up the green technologies over time.
Also, watch out for companies that are selling their assets to others to offload their carbon footprint. Is that really addressing the issue with emissions? Sounds like robbing Peter to pay Paul while getting CO2 off their books.
Again the companies that have a pragmatic approach to decarbonization I think will be the most successful. If you look at all the industrial systems around the world many are CO2 intensive, but they produce large quantities of products.
A very large portion of green technologies that focus on sustainability are very novel (new and unproven), require large portions of capital, and produce orders of magnitude smaller results than traditional tech.
For example, using woody biomass to convert trees to fuels yields a small percentage of the volume of fuels that a new blue refinery would yield at the same cost. These refineries are also very novel so it’s unknown how reliable they will be. For me, it’s about taking initial steps to invest in these projects to see which ones work before fully commercializing. I think that is why you see the big producers wait for the independent investors to take a swing at these projects before they fully commit.