Introduction
In the oil & gas industry, oil supermajors term commonly refers to the group of integrated oil companies (IOC) that has a presence in the complete cycle of hydrocarbons, starting from exploration & production to downstream refining and fuel retail operations. The group mainly includes BP, Chevron, ExxonMobil, Shell, and TotalEnergies. Therefore, this thought piece will mainly focus on these companies’ strategies and investments in the biofuel space.
Over the years, these supermajors have maintained a dominating position in the refining industry and captured about 12% of the global refining capacity. However, in the last decade, the industry has witnessed a common trend among all the supermajors i.e., the rationalization of refining capacity due to weakening refined product demand, sustainability trend which is strongly supported by stringent environmental regulations mainly in developed economies, and increasing support in energy transition space.
These factors have created lots of buzz for biofuels as these fuels are the closest sustainable alternatives to fossil fuels and have already been at the commercialized stage in many markets. Biofuels are mainly characterized into four generations, 1st generation, 2nd generation, 3rd generation, and 4th generation. Among these, currently, 1st and 2nd generation fuel production technologies are available at the commercial level whereas 3rd and 4th generation are either demonstration phase or have no development yet happened. Since generation 1st biofuel is not very sustainable as these fuels are derived from food crops that are available for human consumption. Therefore nowadays, the industry is mainly focusing on the advancement of 2nd generation biofuel.
Why biofuels are gaining traction among oil companies?
Biofuel can be used as a drop-in fuel in the transportation industry
Drop-in fuels mean that the fuel can be used in the existing fuel system without the need to change the complete fuel infrastructure. As the transportation industry is one of the largest consumers of refined products, therefore, reducing fossil fuel consumption from the transportation sector is critical to achieving net-zero targets. Biofuels can be used as a drop-in fuel in the transportation sector and thereby helps in mitigating carbon emission. Therefore, biofuels are considered one of the alternatives to energy transition from conventional fossil fuels in the transportation sector.
Support given to oil companies to increase biofuel production
Countries across the globe have taken net-zero commitments at the international level and to achieve their targets, they are progressively focusing on conventional fossil alternatives. Among many alternatives, they are focusing on biofuels as well. This is because the electrification of the transportation sector will happen over a long period of time. Therefore, countries are supporting the biofuel industry through several lucrative policies.
Further, many countries are highly dependent on crude oil & gas imports and since the oil & gas market is highly uncertain therefore in many times it marks a dent in the crude importing country’s economy. As biofuel is produced using waste feedstock (2nd generation), thus, this can be produced in any country without much dependency on import. This is one of the key reasons why governments across the world are promoting biofuel production.
Oil supermajors biofuel target
Company | Current biofuel production/supply | Biofuel production target |
BP | 27,000 b/d (2022) | 50,000 b/d (2025) 100,000 b/d (2030) |
Chevron | 40,000 b/d (2022) | 100,000 b/d (2030) |
ExxonMobil | NA | 200,000 b/d (2030) |
Shell | Supplied 9.5 billion liters (2022) | NA |
TotalEnergies | Supplied 3.3 million tons (2022) |
Oil supermajors' investment decisions and developments in biofuel/energy transition
BP
Chevron
ExxonMobil
Shell
TotalEnergies
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