OPIS Forum: Energy Transition is about Diversification, Not a Linear Shift
The simultaneous rise in consumption of both fossil fuels and renewables is making energy transition less a simple phase-out of traditional fuels and more an expansion of power sources, with the process likely to take longer than expected, given varying stages of development across the world, said panelists at the OPIS Energy and Chemicals Forum on Wednesday.
In China, electric vehicle penetration is expected to exceed 50% this year, reshaping the demand for oil and related fuels. Advances in battery technology, along with government incentives such as tax exemptions and highway toll waivers, are accelerating EV adoption across the country.
“People have begun to drive EVs to their hometowns during the Spring Festival, because battery technology has improved,” said Fairy Wang, vice president, Sinopec Economics and Development Research Institute. “The average EV can support 500 to 600 kilometers after a single charge, which will have a huge impact on gasoline.”
According to Sinopec EDRI, the number of EV cars in China is projected to hit 44 million units this year, displacing at least 25 million mt of gasoline, as OPIS reported earlier.
However, not all countries share China’s capacity and rate of renewable adoption. Many are still in the earlier stages of the energy transition, moving gradually from traditional biomass fuels to hydrocarbons rather than making a direct leap to renewables. This reflects differing economic capacities, infrastructure challenges and energy needs.
“We need to take into account every country’s starting point,” said Adrian Calcaneo, vice president, energy and feedstocks, OPIS. “Two billion people in the world still use firewood. When we talk about transition, we don’t think about the transition from firewood to hydrocarbons. So I think we need to [consider] that energy transition could be a lot slower and harder than anticipated.”
Meanwhile, oil majors like BP and Shell have pulled back from aggressive upstream production targets, showing a recalibrated approach in the long-term complexity of the energy transition. Ultimately, it comes down to money and shareholder returns.
“Big oil companies specialize in what they know best—producing oil,” noted Steve Lewandowski, vice president of global olefins at Chemical Market Analytics by OPIS. “Transitioning into other renewable areas remains more entrepreneurial and challenging, given the political complexities and the significant infrastructure investments required.”
On the emissions front, the petrochemical sector contributes less than 2% of global CO2 equivalents. Refining emissions, while significant, are proportionally smaller compared to sectors such as cement or fuel production. “There are ways to electrify processes. For example, using electricity to power steam cracker furnaces instead of burning fossil fuels,” Lewandowski said.
The OPIS Forum in Singapore attracted more than 200 participants.
–Reporting by Sang Ah Lee, slee@opisnet.com; Editing by Mei-Hwen Wong, mwong@opisnet.com