🟧 Introduction
Welcome to the latest edition of the OMS Newsletter!
As we enter February 2025, we continue to explore the evolving landscape of the petroleum and natural gas industries.
This edition analyzes the latest trends, challenges, and opportunities shaping the oil and refinery sector globally.
The energy sector is rapidly transforming, influenced by regulatory changes, geopolitical factors, and technological advancements. Companies must remain adaptable and forward-thinking to maintain a competitive edge. This newsletter provides a comprehensive overview of the industry’s current state, from shifting oil demand trends to supply dynamics, refining strategies, and sustainability initiatives.
The Oil and Refinery Sector in 2024: Trends, Challenges, and Opportunities
🟧 The Oil and Refinery Sector in 2024: Trends, Challenges, and Opportunities
1. Global Oil Demand Trends
Deceleration in Oil Demand Growth
Global oil demand growth is slowing as the energy transition accelerates. Adopting electric vehicles (EVs), renewable energy and energy-efficient technologies is tempering the reliance on traditional oil-based fuels. By 2030, oil demand will plateau at around 106 million barrels per day (mb/d). This trend is driven by the increasing push for sustainability and environmental responsibility across industries, influencing investment and production decisions. (IEA)
Regional Disparities in Demand
Emerging economies, particularly in Asia, are driving demand growth:
-
India and China: These countries account for the bulk of global demand increases driven by petrochemical production and transportation fuels. The growth in these markets is fueled by industrial expansion and urbanization. (Hedgepoint Global)
-
Advanced Economies: Demand in developed nations is declining, from 45.7 mb/d in 2023 to 42.7 mb/d by 2030, as these regions transition to clean energy solutions. Policies that reduce carbon footprints, such as stricter emissions regulations and incentives for green technology adoption, are accelerating this shift. (Energy Community)
2. Supply-Side Dynamics
-
Rising Oil Supplies Global oil supply capacity is expected to outpace demand, rising by 6 mb/d to 113.8 mb/d by 2030. The United States leads the expansion, contributing significantly to non-OPEC+ production growth, along with Brazil, Guyana, and Canada. Technological advancements in drilling and extraction have improved efficiency, making production more cost-effective. (S&P Global)
-
OPEC+ Strategy OPEC+ faces the challenge of managing a surplus in production capacity. While the alliance has outlined a gradual increase in production, the strategy remains flexible, depending on market conditions. Saudi Arabia and the UAE focus on natural gas liquids (NGLs) and condensates to diversify their energy portfolios. (Oxford Energy)
3. Refinery Adjustments
Demand for Non-Refined Fuels
Non-refined fuels like NGLs and biofuels capture a significant share of global demand growth through 2030. This trend reshapes the refining sector as traditional gasoline and diesel demand slows. Refineries that can adapt to this shift will remain competitive, while others may face closures. (IEA)
Impact on Refinery Operations
Refineries will need to:
-
Reconfigure Production: To meet evolving market needs, shift the focus from gasoline to products like jet fuel and petrochemical feedstocks.
-
Address Declining Margins: Mature markets, especially Europe and North America, may see refinery closures due to reduced utilization rates and profitability challenges. Refinery operators will need to invest in modernization and efficiency to stay viable.
4. Investment Trends
Upstream Investments
Global upstream capital expenditures reached an eight-year high of $538 billion in 2023, with further growth expected in 2024. Investment is focused on boosting production capacity, particularly in NGLs and condensates. Companies are also prioritizing projects that integrate sustainability practices. (IEA)
Biofuels and Renewable Integration
Growing demand for low-carbon fuels has led to increased investment in biofuels. This aligns with global efforts to decarbonize the energy sector and meet emission reduction targets. Countries worldwide are implementing incentives to support biofuel development, pushing refiners to diversify their production capabilities.
🟧 Sustainability and Decarbonization Efforts
As the global energy industry undergoes a fundamental shift towards sustainability, oil, and gas companies are investing in cleaner technologies, reducing their carbon footprint, and integrating renewable energy into their portfolios. Governments and regulatory bodies worldwide are implementing stricter environmental policies, compelling the industry to accelerate its transition toward a low-carbon future.
1. Carbon Reduction Goals
Oil and gas companies are implementing ambitious carbon reduction strategies to align with national and international climate targets, including the Paris Agreement and Net-Zero Emissions (NZE) Roadmap.
Key initiatives include:
-
Carbon Capture, Utilization, and Storage (CCUS): Companies are deploying CCUS technologies to trap carbon dioxide emissions from industrial processes. They store the emissions underground or use them for enhanced oil recovery (EOR).
-
Hydrogen Production: The shift toward hydrogen as an alternative fuel is gaining momentum. Green hydrogen, produced via renewable energy electrolysis, is being explored as a sustainable energy carrier.
-
Emission Reduction Commitments: Major oil producers, including BP, Shell, and ExxonMobil, have pledged to cut greenhouse gas (GHG) emissions through energy-efficient operations and increased reliance on cleaner fuels.
-
Carbon Pricing & Offsetting: Many companies are adopting internal carbon pricing mechanisms and investing in carbon offset projects, such as reforestation and afforestation initiatives.
2. Refinery Efficiency and Green Upgrades
Oil refineries are under pressure to improve efficiency and reduce emissions.
Some of the significant strategies being implemented include:
-
Process Optimization & Digitalization: AI-driven monitoring systems and predictive analytics are helping refineries improve operational efficiency, reducing energy consumption and emissions.
-
Electrification of Operations: Using electric heaters, pumps, and compressors instead of fossil-fuel-powered equipment minimizes carbon emissions in refineries.
-
Advanced Bio-Refineries: Many traditional refineries are being converted into bio-refineries that process renewable feedstocks, such as vegetable oils, cooking oils, and animal fat, to produce sustainable aviation fuel (SAF) and renewable diesel.
3. Renewable Energy Integration
Oil and gas companies are expanding their investments in renewable energy to diversify their energy mix and contribute to the decarbonization of the industry.
Some of the most prominent developments include:
-
Offshore Wind Power: Companies like Equinor, Shell, and TotalEnergies are investing in offshore wind farms to generate clean electricity for industrial operations.
-
Solar Energy Projects: Refineries and petrochemical plants increasingly integrate solar power to reduce their dependence on fossil-fuel-generated electricity.
-
Geothermal & Waste Heat Recovery: Some refineries are tapping into geothermal energy sources or using waste heat recovery systems to enhance energy efficiency.
4. Sustainable Fuel Alternatives & Biofuels
Low-carbon fuels are becoming essential to the energy transition, helping industries decarbonize while maintaining energy security.
Investments are rising in:
-
Sustainable Aviation Fuel (SAF): Airlines and fuel suppliers are accelerating the production of SAF derived from waste oils, agricultural residues, and algae.
-
Renewable Diesel & Biodiesel: Refiners are increasing their capacity for hydrotreated vegetable oil (HVO) and fatty acid methyl ester (FAME)- based biodiesel to replace traditional diesel.
-
Synthetic Fuels (E-Fuels): Produced using captured CO₂ and green hydrogen, synthetic fuels are emerging as a viable low-carbon alternative for transportation.
5. Regulatory & Market Pressures
Governments, financial institutions, and consumers demand increased transparency and accountability regarding sustainability efforts.
The following regulatory and market trends are shaping the industry’s sustainability strategies:
-
More substantial Emission Standards: New policies, such as the EU Emissions Trading System (EU ETS) and the U.S. Inflation Reduction Act (IRA), incentivize the adoption of clean technologies.
-
ESG (Environmental, Social, and Governance) Reporting: Investors and stakeholders demand better ESG disclosures, influencing corporate sustainability policies.
Public & Consumer Pressure: Growing consumer preference for sustainable energy sources drives energy companies to adopt greener practices.
🟧 Conclusion
The oil and refinery industry is experiencing profound changes driven by technological advancements, shifting demand patterns, regulatory pressures, and sustainability initiatives. Companies that adapt to these evolving dynamics will thrive in the years ahead. Staying informed and agile will be key to navigating the market’s complexities.
We hope this newsletter provides valuable insights to help you stay ahead in the industry. Stay tuned for our next edition, where we will explore new developments shaping the energy sector. Until then, stay safe and keep innovating!
Disclaimer: OMS eLearning Academy and ChatGPT collaborated as Humans and AI to generate this article for you.
Stay tuned for more groundbreaking publications and enrich your expertise with OMS Academy. 🌐✨
Sign up today to start your learning journey.
➡️ Sign Up Now 🚀
Thank you for being a part of the OMS eLearning Academy community.
If you have any questions or feedback, please contact us.
“At OMS eLearning Academy, excellence in education isn’t just our goal; it’s our promise – a promise to fuel minds and forge futures in Downstream Refining.”