Looking back at the first 15 years of the 21st century, IHS Chief Researcher for Global Oil Markets and Energy Scenarios and IHS Energy CERAWeek Vice Chairman Jim Burkhard said the downstream is “a fascinating and often quite rewarding industry to be in.”
Moderating a panel at IHS Energy CERAWeek held recently in Houston, Burkhard noted Phillips 66 Chairman and CEO Greg Garland had previously described the pace of investments in the North American midstream as “a pause.”
“Would you describe that trend as a result of the decline of U.S. crude production, or was it simply too much capacity being built in the midstream?” Burkhard asked.
“Well, maybe a little bit of both,” Garland replied. “There’s no question that the drill bit has slowed.”
Garland said while “probably some overcapacity” was built, he believes a considerable amount of infrastructure is required.
“I think the MLPs (master limited partnerships) that are going to be favored for this next period of time are those that have great balance sheets, strong parents and great portfolios of projects,” he added. “And so, there’s room. I don’t think the MLP model is completely broken.”
Regarding various issues and challenges facing building new infrastructure in India, IndianOil Chairman B. Ashok said there’s a tremendous need for additional infrastructure, especially pipelines.
“We are certainly looking at the development of the grid and another 15,000 kilometers of natural gas pipelines because unless that infrastructure is there, the gas usage is not going to improve,” he said. “There are challenges, of course, in terms of getting the right of use for land, because the Hindus who are owners of land are not really comfortable giving away their piece of land now. Things are not as simple as they used to be 20 years ago. But we need to find solutions.”
Ashok stressed government and industry must consider the needs and attitudes of India’s citizens regarding the acquisition of their land.
“You can’t say, ‘I am making a big investment so everything should be provided to me by the government and by the people,’” he reasoned. “I think we need to explain to them the purpose of what we’re doing and make sure our industry is not going to come in the way of their living but rather enhances what they’re doing and provides for economic development. There should be a much more meaningful dialogue between industry and the com-munity at large.”
Responding to how the COP21 Paris conference on climate change will impact the future of refining, BP’s Chief Executive of Downstream Tufan Erginbilgic noted some of the implications of the conference are yet to be understood.
“All the countries need to come back with nationally determined contributions by 2020. Then it’s going to be clear,” he said. “We concluded in our model that there’s significant improvement in energy intensity. But the fact that there is still growth in carbon emissions suggests further action is still required, obviously.”
Philippe Sauquet, president of Total Refining and Chemicals, expressed one immediate consequence of COP21 is good news for European refiners that previously were required to pay for carbon dioxide (CO2) emissions.
“If COP21 gives a level playing field to all refiners, it would be better for European players like Total,” Sauquet said. Sauquet added the conference allows for growth in the biofuels industry.
“We can say that we, as refiners, were fighting against biofuels. Today we con-sider biofuels to be part of the solution,” he said. “It is the only way to reduce CO2 emissions in transportation in the short term, and this is why we intend to make more room in our product mix for it.”
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