Impact of the use of biofuels on oil refining and fuels specifications

The EU has agreed on achieving a 20% reduction in greenhouse gas emissions and an increase to 20% in the share of renewables in its energy mix by 2020. For the transport sector, a 10% target for the use of renewable energy including biofuels was also agreed, tied to a set of sustainability criteria. A substantial increase in biofuels consumption, from the level of 2.6% of EU road transport fuels in 2007, is therefore needed to meet the 10% EU target. This may have an impact on fuel specifications within as well as outside the EU.

Increasing biofuel supply implies reduced oil refinery processing, potentially leading to reduction of existing refining capacity and affecting the entire oil industry supply chain both in the EU and third countries.

The study therefore aims to assess:

• The impact of increased consumption of biofuels on the oil refining process, refining economics and fuel specifications. Scenarios for supply of gasoline and diesel replacers and use of high and low blends with conventional oils.
• Prospects for biofuels in bunkering and aviation fuel markets.
• Impact on refinery energy use, refinery greenhouse gas emissions, impact on prices of oil, oil products and their differentials; for example, prospects for simultaneous biofuels expansion outside and within the EU affecting gasoline market balances in the Atlantic Basin with potentially global implications.
• Implications for security of oil supply in the EU and options for management of the downstream sector in case of disruption of biofuel supply.
• Experience in leading biofuel markets such as Brazil, the USA and parts of Asia, to be integrated into the above considerations.

Conclusions

• For every barrel of biogasoline entering the gasoline pool European gasoline prices are expected to move downwards and so reduce the net cash margin for European refiners. European refiners can be expected to respond to these price signals by reducing their supply.
• As refineries reduce their production their carbon emissions will fall in line with the reduction in crude demand. However for biodiesel, only once the biodiesel volumes close the large European diesel deficit sufficiently to narrow the European diesel import parity pricing environment will refining economics, carbon emissions and crude demand alter.
• Whilst electric vehicles are expected to reduce gasoline demand the time it takes for them to do so initially reduces the impact on European refineries.