Friend or Foe?
Electric vehicles and refining
World Refining Association
H
ow well can oil refining – the source of
hydrocarbon-based fuels that have sustained
much of the world’s transport for more than
a century – mix with electric vehicles (EVs)?
www.wraconferences.com
That is the basic question the World Refining
Association (WRA) sought to answer when it
commissioned a recent survey of international
downstream industry professionals. Queried
about perceived threats to refining from EVs,
EV market supports, and the outlook for syner-
gies between the refining and EV spheres, survey
participants have provided some enlightenment
on the matter. In addition, downstream industry
experts have helped WRA to put survey results
into the proper context. Read on for a compre-
hensive overview of the survey.
What’s so worrisome about EVs?
When asked how concerned they are about EVs,
the majority of survey participants – 61.1 percent
– admitted that they are “somewhat worried”
www.digitalrefining.com/article/1001524
Produced by:
about the vehicles’ impact on the oil refining
industry and that refiners need to “plan ahead.”
However, they tempered that concern with the
sentiment that the effects of EVs tend to be
“exaggerated” – at least in the near term.
The remaining respondents selected the follow-
ing survey answer choices when asked how wor-
ried they are about EVs:
23.6% Not worried at all – “We’ll all be out of the
industry far before EVs have any real impact”
8.3% Very worried – “EVs are a near-term threat
to refiners” diesel and gasoline, and we will see
greater numbers of hybrid vehicles.”
6.9% Terrified – “Refineries are in deep trouble…
transport fuel demand will soon fall off a cliff”
In a related question seeking their thoughts
of how significant an effect EVs could have on
July 2018 1
that refiners need to “plan ahead.” However, they the overall impact on demand. decrease,” said David Pullan, Gro
tempered that concern with the sentiment that the effects

6.9%
“I would consider the impact Downstream Technology
of electric vehicles to beand Dev
of EVs tend to be “exaggerated” – at least in the near term.
Vice President
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Pullan added restrictions
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EVs w
nearly
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much” respondents
of an impact
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expressed chose the response
nonchalant “None
attitudes, at 52.8
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EVs constitute just one part of the changing “Demand for traditional fos-
countries. In addition, slightly more than 15 percent of be able
decrease,” to handle the requirements for new pr
transport demand equation confronting oil refin- sil fuel will said David Pullan,
decrease,” said David Group
survey participants chose the response “None at designed
Pullan, toGroup serve EVs.

6.9%
ers, according to Robin Nelson, Science Director Downstream Technology and Development
Downstream
all – electricity isn’t an option
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refiners, according to Robin Nelson, Science products from commercial
the actual 30topics, percent.” one key question will be: s
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oil demand,
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significant – bigwillchanges Pullan added that the proliferation
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which die- drive changes
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and wetowill see greater
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•
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impact given see cars with
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strong should
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market penetration remain low in the car • Assetssuch
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addition, slightly more than 15 percent of about achieving necessary competency levels
be able to
in the medium term. However, he predicted will not be able to handle the requirements handle the requirements for newfor products
survey participants chose the response “None
there is a much stronger likelihood that pure EVs newdesignedat productsto serve EVs.
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all – electricity
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be used for heavy
as smaller cityduty,
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EVs constitute just one part of the changing products tied to EVs.
• Regarding pricing, market share, and other typ-
“It will affect the whole
transport demand equation confronting oil •ically
Regarding
commercial pricing,
topics,market oneshare, and otherwill
key question typically
refiners, according to Robin Nelson, Science be: should the company decrease margins to keepshould the
commercial topics, one key question will be:
downstream supply chain
Director with Concawe, a division of the company
market share decrease
or gather marginsas much to keep market
margin as possi- share or
such as supply and logistics,
European Petroleum Refiners Association. ble gather
while demand
as muchismargin
still there?as possible while demand is still
• Inthere?
retail, the focus will be on new businesses
“We are entering a period of transition in which a variety
wholesale, and retail”
of technologies leading to greater fuel efficiency will be
and solutions. As a result, the product mix will
• In retail, the focus will be on new businesses and
David Pullan, Group Downstream Technology need to be wider; among other things, this would
released by car manufacturers,” Nelson told WRA. “We will solutions. As a result, the product mix will need to be
raise questions about achieving necessary compe-
and Development Vice President,
see cars with higher-efficiency combustion engines, both MOL Group wider; among other things, this would raise questions
tency levels.
about achieving necessary competency levels.
“The outlook for heavy-duty vehicles will EVs vs CO2: Winds of Change or Just Hot Air?
depend on their usage,” added Nelson. “Batteries Advocates of making EVs more commonplace on
are less suitable for long-haul vehicles but could the world’s roadways frequently tout the vehi-
be very relevant for city buses, etc.” cles’ contribution to the broader goal of curbing
Nelson also said that most of refiners’ concern carbon dioxide (CO2) emissions. On the ques-
regarding EVs will likely hinge on the balance on tion of EVs’ ability to accomplish this heady
demand as well as the overall impact on demand. task, respondents to the WRA survey expressed
“I would consider the impact of electric vehicles some reservations. When asked if they believe
to be less important than the change in marine EVs will substantially impact CO2 emissions

2 July 2018 www.digitalrefining.com/article/1001524

over the next two decades or so, nearly 71 per-
cent answered in the affirmative – but to varying
degrees. Slightly less than 31 percent, or less than
one-half of those responding “yes,” agreed that
EVs will “substantially” affect releases of CO2 into
the atmosphere. Meanwhile, approximately 40.3
percent of the “yes” votes included a caveat: that
other factors will be more dominant than EVs in
terms of cutting emissions.
What, then, do survey participants think will
have a greater effect in reducing CO2 releases?
When asked what will make the biggest impact
in cutting CO2, a sizable majority of survey par-
ticipants – 69.4 percent – selected “renewable
energy.” Just under 10 percent chose “changes
to livestock production” while 5.6 percent picked
“Electric vehicles.” Approximately 1.4 per-
cent indicated that “Moves toward petrochemi-
cals” will limit CO2 emissions. Nearly 14 percent
selected other factors not specified within the set
of answer choices.
To be sure, refiners and others fossil fuel indus-
try players are hardly immune from the push in
Europe and elsewhere to dramatically limit CO2
releases.
“The drive for decarbonization will impact
refiners and this will carry through to oil
demand,” said Nelson. “Gas has a very differ-
ent outlook as this can substitute for coal and be
part of the transition to a lower carbon world.
Liquefied natural gas (LNG) is likely to increase
in shipping, although it is difficult to assess the
impact of this trend today.”
Achieving the goal of greater EV market pen-
etration is not without its own formidable chal-
lenges. When asked what they think will hold back
EVs from becoming a success today, the largest
share of survey respondents – nearly 39 percent
– selected “lack of accessible charging infrastruc-
ture.” More than one-third – 34.7 percent – cited
“price” as the leading barrier while another 16.7
percent selected “technology and reliability.” Just
under three percent answered that “nothing” will
prevent EVs from succeeding and nearly seven
percent selected “other” reasons.
Echoing the EV challenges tied to price and
limited charging infrastructure, Pullan also
observed that EV manufacturers still need to
overcome obstacles tied to their products’ driv-
ing range on a single charge as well as acceptance
among consumers. Nelson added that targeted
EV consumers vary markedly by geography.
www.digitalrefining.com/article/1001524
“In Europe EVs are currently attractive prop-
ositions for those that can afford them,” said
Nelson. “The costs will need to improve consider-
ably, but this is in part due to the brand strate-
gies of the producers. This is different in China,
where the majority of EVs are low-cost, small,
low-power city cars and e-bikes.”
The differences and challenges do not end there.
“A well-known factor is the lack of a charg-
ing infrastructure, along with this are issues on
‘SMART’ charging which may dictate when your
vehicle is charged,” continued Nelson. “In turn,
this is likely to lead to differentiated costs for the
service. The manufacturers are faced with mas-
sive retooling costs as well as a change in the labor
force as EVs are reportedly simpler to produce.”
More than 80 percent of respondents also
acknowledged misgivings about the advantages
of EVs compared to vehicles powered by other
“The drive for
decarbonization will impact
refiners and this will carry
through to oil demand”
Robin Nelson, Science Director, Concawe
sources. When asked if they envisage alterna-
tive forms of transport being successful instead
of EVs, nearly 42 percent selected the response
“Yes, vehicles running on hydrogen, LNG and
biofuels have more potential.” Another 40 per-
cent expressed skepticism about the rapid demise
of gasoline and diesel-powered vehicles, choosing
the answer “I don’t think the combustion engine
will be phased out as quickly as people think.”
Just 18 percent opted for “No, EVs are the most
advanced.”
From Pullan’s perspective, EVs do enjoy some
advantages over other alternatives.
“Electricity is not totally new,” said Pullan. “At
the dawn of drive this was the second option.
From then it is in everybody’s lives. At home, at
work, electricity is everywhere. In our opinion, it
will be in the top three fuel category.”
In addition, Pullan observed that proponents of
other internal combustion engine (ICE) alterna-
tives still need to overcome some cost-intensive
technical challenges.
July 2018 3
 When asked where EVs will make
the biggest impact, the results were:
56.9% Europe
18.1% Asia-Pacific
13.9% USA & Canada
11.1% Middle East & India
“Other elements like maintenance and distri-
bution costs are very high,” said Pullan. “These
are valid for electricity as well, but the technol-
ogy is now more solid. Later the mix of fuels will
be wider, the competition will be high before the
next consolidation.”
Pullan added, however, that increasing EV
market share and expanding the charging net-
work demand on incentives. Nelson concurred,
pointing out that making the economic case for
non-ICE-powered vehicles tends to require some
form of outside market invention. For instance,
governments in Europe, the United States (par-
ticularly the State of California), and China have
taken leading roles in putting tax incentives and
CO2 emissions-reduction targets in place to pro-
mote EV adoption.
The findings of a 2016 report by McKinsey
and Company puts the effectiveness of some
EV-promotion measures into question, though.
For instance, the study found that China
posted 69 percent growth in new EV registra-
tions from 2015 to 2016. In contrast, Europe’s
EV market grew by just 7 percent during the
same period; the lacklustre year-on-year move-
ment led McKinsey to dub Europe’s EV mar-
ket “almost stagnant.” Respondents to the
4 July 2018
“EVs are forecast to reach
a point in which they can
compete on cost with their
ICE equivalents in the next
decades”
Robin Nelson, Science Director, Concawe
WRA survey presented a different story. When
asked where EVs will make the biggest impact,
the majority (56.9 percent) selected Europe.
Garnering slightly more than 18 percent of
responses, Asia-Pacific was a distant second.
The United States and Canada (13.9 percent)
and the Middle East and India (11.1 percent)
secured the remaining responses. No respond-
ents selected Africa or Latin America for this
survey question.
“Alternative fuels will contribute to a lower
demand for crude oil-based fuels, when the fuels
providers are incentivised to do so,” Nelson said.
“Whilst pure economics are unlikely to be suffi-
www.digitalrefining.com/article/1001524
cient, they do represent an opportunity to decar-
bonise liquid fuels.”
Furthermore, Nelson pointed out that innova-
tion milestones and other factors will influence
EV market development.
“EVs are forecast to reach a point in which they
can compete on cost with their ICE equivalents in
the next decades,” said Nelson. “These forecasts
are based on critical assumptions around the cost
of batteries, the technologies for battery manu-
facture, and the cost of the energy infrastructure.
Another consideration will be the degree to which
the grid has been decarbonized.”
Pathways to Greater Coexistence?
Although the response breakdowns to survey
questions up to this point reveal pockets of skep-
ticism about EV market growth potential, a fair
number of respondents also expressed that they
have become more receptive to the non-ICE-
powered vehicles. When asked if their views on
EVs had changed over the past two to three years,
a plurality (43.1 percent) selected the response
“Yes, I am now more optimistic about them than
before.” In comparison, 16.7 percent chose “Yes,
I am now more worried about them than before.”
The remaining 40.3 percent indicated that their
views on EVs had not changed.
Regarding whether their respective companies
had a strategy in place to adapt to the emergence
of EVs, the responses skewed negative: 55.6 per-
cent responded “No” and 44.4 percent indicated
“Yes.” Survey participants did, however, signal
some sort of proverbial silver lining. On the ques-
tion of whether they think any scope exists for
refiners to view EVs as an opportunity, only one
out of four respondents answered “No.” Because
there were three affirmative options, however,
survey participants answering “Yes” did so for
different reasons. Among the 75 percent in the
“Yes” camp:
44.4% chose the answer “Yes, the electricity
required by EVs will have to come from somewhere”
16.7% indicated “Yes, the production of EVs will
increase demand for refined products”
13.9% selected “Yes” for other reasons
When queried about how refiners can adapt to
the potential impact of EVs, nearly seven in 10
www.digitalrefining.com/article/1001524
respondents selected “Invest more into petro-
chemicals” (34.7 percent) or “Become less reli-
ant on crude as the refinery feedstock and look
to renewable hydrocarbons” (33.3 percent).
The third most popular answer to this ques-
tion, garnering 16.7 percent, was “Continue as
normal, EVs are still only an emerging technol-
ogy.” Approximately 6.9 percent of respondents
advised exporting more to developing markets
while 8.3 percent indicated other reasons.
According to Pullan, refiners can be proactive
and leverage their well-established businesses
and widespread retail networks – and perhaps
even partner with EV manufacturers – by look-
ing for new products to sell to customers. For
example, refiners – MOL included – have already
gotten into the car-sharing business. In the case
of MOL, the shared vehicle fleet will increas-
“We will see cars with
higher-efficiency
combustion engines, both
diesel and gasoline, and we
will see greater numbers of
hybrid vehicles”
Robin Nelson, Science Director, Concawe
ingly consist of EVs. The increased popularity
of car-sharing does come with a price, however.
Pullan stated that original equipment manufac-
turers – automakers – likely have the most to
lose from this trend.
“From our side, what we can forecast is that
the amount of kilometers will increase with this
trend,” Pullan said, adding that vehicles will need
to refueled somehow – regardless of whether
they use an ICE or an electrical motor.
“On the long run, a smart energy manage-
ment system will be established,” Pullan added.
“Refineries can leverage some advantages from
it, when they will get the required electricity and
from where – two-way charging, for example.”
In Nelson’s view, how well a refiner can lever-
age any potential advantages will depend on the
refiner.
“A clear opportunity for some, but this becomes
July 2018 5
 (79.2 percent) of respondents selected “Conferences, news
articles and journals.” Just 11.1 percent indicated that they
obtain information from “Contacts in the EV industry” and the
remaining 9.7 percent chose “In-house strategists.”
7.8%
10% 7.8%
Where our responders came from
As a point of reference, the largest share of
8 www.wraconferences.com
WRA’s cadre of survey respondents – 46.75
percent - reported that Europe is the region in
which they operate. Participants who operate in
Asia constituted the next-largest share (27.27
percent).
Slightly more than 10 percent of respondents
hailed from Latin America while even shares (7.8
percent each) of survey participants represented
more company-specific,” concluded Nelson.
“Refiners integrated with a retail network may be
better positioned than the merchant refiner. In
the widest sense, EVs will impact the demand for
gasoline and diesel as part of the overall drive to
decarbonise transport.”
EV points to ponder for refiners
During the past year, World Refining Association
(WRA) on three occasions has assembled refining
thought leaders from key downstream players in
Europe and the Middle East.
Experts from companies such as Saudi Aramco,
Kuwait National Petroleum Corp., CEPSA,
Equinor (formerly Statoil), Essar Oil, BAPCO,
6 July 2018
46.75%
27.3%
Africa, the United States and Canada reflected a
broad mix in terms of geographic and downstream
sector representation. When asked where
they source their information about EVs, the
overwhelming majority
(79.2 percent) of respondents selected
“Conferences, news articles and journals.” Just 11.1
percent indicated that they obtain information from
“Contacts in the EV industry” and the remaining 9.7
percent chose “In-house strategists.”
Sabic, Total, Borouge, Grupa Lotos, and oth-
ers have provided WRA with a valuable refin-
ers’ perspective on evolving electric vehicle (EV)
and broader personal mobility trends. Below
are some highlights that WRA has gleaned from
these high-level meetings.
• Pricing, charging, and infrastructure limitations
currently relegate EVs to a small segment of the
overall automobile market. As EV costs decrease,
however, the vehicles should become a practical
option for more people and thus chip away at the
dominant market share that internal combustion
engine-powered vehicles enjoy. By exactly how
much is up for debate.
The automotive industry has projected that 30
www.digitalrefining.com/article/1001524
to 40 percent of the vehicle fleet will be electric
by 2040. Taking a more conservative stance, oil
companies have predicted just 10 to 20 percent.
• With forecasts that EVs and other forms of
mobility not powered by petroleum-based fuels
will gain wider public acceptance, refiners will
need to strategise and act – fast – to compensate
for the requisite drop in demand for gasoline and
diesel. Manufacturing more petrochemicals is
one way to make up for this trend.
• The admonition to strategise and act begs an
important question: are downstream companies
effecting change or merely witnessing it? There
are potential opportunities for companies to be
proactive. For instance, the United Arab Emirates
(UAE) – with its abundant solar power poten-
tial – provides an ideal environment for EVs
because automobile journeys tend to be short in
the region. Moreover, the UAE’s existing petrol
station network would need few modifications to
accommodate solar charging infrastructure.
• Globally, car demand continues to grow.
Furthermore, EVs alone will not be able to sat-
isfy increasing demand in, say, China and Africa.
These regions will still need refined fuel prod-
ucts – for automobiles, bunker fuel, jet fuel, and
larger trucks – for years to come. In addition,
recognise that producing EVs (think: polymer
auto parts) still requires refined products.
• Hybrids, which still need refined fuels and don’t
require the infrastructure that EVs demand, are
becoming more sophisticated and offer emissions
reductions and improved fuel efficiency. They will
be a “co-runner” of EVs, pushing back the imple-
mentation of pure EVs.
• Decarbonisation is the ongoing central goal
of public policy discussions that affect refiners,
both in Europe and elsewhere. Policymakers con-
www.digitalrefining.com/article/1001524
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sistently promote electrification as the means to
attain a net-zero carbon dioxide (CO2)-emitting
economy. As momentum for this outcome grows,
refiners face mounting pressure to respond and
adapt.
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July 2018 7