Interview with Tim Shire, Energy Management & Combustion at Essar UK
Tim – thank you for your time! Before we start off, could you share a little bit about how you got involved in the industry and your current role at Essar UK?
As a young, newly chartered engineer, I joined KBC as an energy efficiency consultant in 2006. At KBC I worked at a number of oil and gas and petrochemicals sites around the world including several years based in Asia. A couple of years back I returned to the UK, where I am the site energy lead at Essar UK.
Day to day, I drive energy reduction initiatives and CO2 reporting, whilst working on a longer term decarbonisation plan that involves both electrification and integration of the HYNET industrial hydrogen cluster with the refinery.
What’s your outlook on crude oil going forward?
Long term decline, but in the medium term field production decline will be faster than demand decline so prices will remain high enough to justify a level of continued upstream investment.
I expect a return of US shale, and with less dramatic production growth, and better environmental performance than the last boom. Investments in rapid-decline shale assets will be lower risk than offshore developments with a 40-year life (which implies operation well into the net zero horizon) – the return of shale is more likely to focus on profitable cashflow rather than all out production, so I see more monetisation of flared gas and tighter capex and opex discipline.
What do you think the shape of post-pandemic recovery will look like across different regions, Europe, Asia, Americas etc?
I see Asia and Americas returning to their previous direction (of plateauing growth) but slightly lower oil demand than pre-COVID trends, as ongoing economic fallout and de-globalisation act as headwinds.
Europe is interesting, with the prior trend of decline across the board perhaps slowed – perhaps more re-shoring and domestic chemicals production (especially circular or partly green), perhaps a switch from leisure flights to leisure road travel due to COVID and carbon consciousness. Also a carbon border tax and policy support for H2 economy could give European refiners certain advantages.
Petrochemicals will account for more than a third of global oil demand growth to 2030 and nearly half through 2050, predicts the IEA. What does this mean for refiners? How can they meet growing demand for petrochemicals in the post-COVID world, while also achieving more stringent sustainability objectives?
The devil is in the details. Clearly petchems are a growth product, but poor cyclic timing, or producing a product where everyone else has the same idea is not a silver bullet. A key success criterion will be finding a niche in product demand, or integration with waste or bio derived chemicals.
How can refiners effectively capture the benefits of the energy transition?
Cheap green electricity can reduce operating costs, and allow electrification for decarbonisation with very attractive returns. For example, the carbon price increases this year have switched our strategy from self-generation to import. Refiners are able to effectively make and use hydrogen, which can play a key role.
Refiners product handing, blending, distribution and marketing networks make them ideal hosts to sustainable fuels production, At Essar we have been cultivating several 3rd parties such Fulcrum and Argent, who produce sustainable fuels which reach the market via our outgoing logistics.
Increasing profitability is a key question addressed regularly by refiners, particularly in recent times. What can refiners do to increase profitability with resources that they already have?
It’s all about agility. On the feedstock and products side it’s more important than ever to capture short term pockets of value. I mentioned electricity before – high renewables in the grid means power is often very cheap to buy, but occasionally when the wind stops power goes through the roof and is profitable to export, even to the extent of curtailing high energy consuming units. Agility comes from reliable assets to stand ready, digitalisation – to get the right information in the right hands rapidly, and operational excellence to deliver on the opportunities.
Hydrogen seems destined to play a part in tomorrow’s energy plan. How can operators best prepare?
A major challenge is to choreograph supply and demand – end users can’t invest in hydrogen consuming equipment without a supply, and producers can’t invest in production without consumers. The main thing is refineries need to start communicating and collaborating with their neighbours. For example, at Essar the Hynet project involves a much wider group of companies and stakeholders than typical oil, gas and petrochemicals work with, such as glass making and consumer goods companies seeking hydrogen supply.
What will the fuels of the future be, and what will it take for them to displace the fuels of today?
I believe Electricity will be the main light land transport fuel. For consumer adoption, all that is requires is a continuation of historic price declines in generation costs and battery costs. However, behind the scenes substantial infrastructure investments will be needed.
Blue Hydrogen has an important role, particularly for hard to decarbonise industry, some buildings heating, dispatchable power generation, and occasional transport applications. In Europe the picture is transforming, from supply-driven – with hydrogen developers pushing, to demand-driven – with potential users actively seeking low carbon hydrogen supplies. Hydrogen also requires large infrastructure investments, and will therefore initially gain traction in concentrated industrial clusters.
Bio-derived liquid fuels, particularly for aviation, have a place. A major challenge here is feedstock availability.
What would be the main priority for operators to survive and thrive in the post-pandemic era?
In Europe, a credible deep decarbonisation roadmap is a pre-requisite to accessing finance, and retaining societal license to operate. The same thing will probably extend globally in the short to medium term.