Exclusive Report:

EVs & Refining –

Friend or Foe?

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Exclusive Report:
EVs and Refining
How 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)?
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 synergies 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 comprehensive overview of the survey.

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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” 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 following survey
answer choices when asked how worried 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%
threat to refiners”
Very worried – “EVs are a near-term
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 oil demand,
nearly one-third of respondents (approximately 32
percent) selected “Very significant – big changes
will happen.” The remaining survey participants
expressed more nonchalant attitudes, with 52.8 percent
indicating that they anticipate “Not much” of an
impact given continued strong demand from developing
countries. In addition, slightly more than 15 percent of
survey participants chose the response “None at
all – electricity isn’t an option for heavy duty, aviation and
bunker fuels.”
EVs constitute just one part of the changing
transport demand equation confronting oil
refiners, according to Robin Nelson, Science
Director with Concawe, a division of the
European Petroleum Refiners Association.
“We are entering a period of transition in which a variety
of technologies leading to greater fuel efficiency will be
released by car manufacturers,” Nelson told WRA. “We will
see cars with higher-efficiency combustion engines, both
diesel and gasoline, and we will see greater numbers of
hybrid vehicles.”
In the case of “pure EVs,” Nelson opined that
market penetration should remain low in the car
fleet in the medium term. However, he predicted
there is a much stronger likelihood that pure EVs
will be used as smaller city cars, e-bikes, and short-
distance delivery vans.
“The outlook for heavy-duty vehicles will depend
on their usage,” added Nelson. “Batteries are less
suitable for long-haul vehicles but could be very
relevant for city buses, etc.”
Nelson also said that most of refiners’ concern regarding
EVs will likely hinge on the balance on demand as well as
the overall impact on demand.
“I would consider the impact of electric vehicles to be
less important than the change in marine fuels as we
prepare for 2020,” said Nelson, referring to the International
Maritime Organization’s deadline for lowering the allowable
sulphur content from marine diesel oil from 3.5 to 0.5
percent mass by mass. “But beyond 2020, some cities and
countries are planning restrictions on vehicles with internal
combustion engines.”
Slackening demand for gasoline, diesel, and other refined
fuels may also mean that downstream firms devote more
attention to manufacturing petrochemicals.
“Demand for traditional fossil fuel will
decrease,” said David Pullan, Group
Downstream Technology and Development
Vice President with MOL Group. “Refiners
have to find alternative products to cover
the capacity. In line with the ‘MOL 2030’
strategy, 50 percent of the capacity would go for petchem
products from the actual 30 percent.”
Pullan added that the proliferation of EVs will
drive changes beyond refining. “It will affect the
whole downstream supply chain such as supply
and logistics, wholesale, and retail,” he said. For
instance, he pointed out that:
• Assets such as tankers in supply and logistics will not
be able to handle the requirements for new products
designed to serve EVs.
• In a wholesale context, the entire organization will need
to integrate knowledge about significantly different
products tied to EVs.
• Regarding pricing, market share, and other typically
commercial topics, one key question will be: should the
company decrease margins to keep market share or
gather as much margin as possible while demand is still
there?
• In retail, the focus will be on new businesses and
solutions. As a result, the product mix will need to be
wider; among other things, this would raise questions
about achieving necessary competency levels.
3
 “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

“It will affect the whole downstream

supply chain such as supply and
logistics,wholesale, and retail,”
David Pullan, Group Downstream Technology and Development
Vice President, MOL Group

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EVs vs CO2: Winds of
Change or Just Hot Air?
Advocates of making EVs more commonplace on the
world’s roadways frequently tout the vehicles’ contribution
to the broader goal of curbing carbon dioxide (CO2)
emissions. On the question of EVs’ ability to accomplish
this heady task, respondents to the WRA survey expressed
some reservations. When asked if they believe EVs
will substantially impact CO2 emissions over the
next two decades or so, nearly 71 percent 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 participants – 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 percent indicated that “Moves
toward petrochemicals” 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 industry 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 different 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 penetration is
not without its own formidable challenges. 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
infrastructure.” 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.
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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’ driving range on a single charge as well as
acceptance among consumers. Nelson added that targeted
EV consumers vary markedly by geography.
“In Europe EVs are currently attractive propositions for
those that can afford them,” said Nelson. “The costs will
need to improve considerably, but this is in part due to the
brand strategies 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 charging 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 massive
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 sources. When asked if
they envisage alternative 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 percent
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) alternatives still need to
overcome some cost-intensive technical challenges.
5
 “Other elements like maintenance and distribution costs
are very high,” said Pullan. “These are valid for electricity as
“The drive for decarbonization
well, but the technology is now more solid. Later the mix of will impact refiners and this will
fuels will be wider, the competition will be high before the
next consolidation.” carry through to oil demand”
Pullan added, however, that increasing EV market share Robin Nelson, Science Director, Concawe
and expanding the charging network 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 (particularly the
State of California), and China have taken leading roles in
When asked where EVs will make the
putting tax incentives and CO2 emissions-reduction targets biggest impact, the results were
in place to promote 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
56.9% Europe

18.1%
China posted 69 percent growth in new EV registrations
from 2015 to 2016. In contrast, Europe’s EV market grew
by just 7 percent during the same period; the lackluster Asia-Pacific
year-on-year movement led McKinsey to dub Europe’s EV

13.9%
market “almost stagnant.” Respondents to the WRA survey
presented a different story. When asked where EVs will
make the biggest impact, the majority (56.9 percent) USA & Canada
selected Europe. Garnering slightly more than 18 percent of

11.1%
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
Middle East & India
respondents 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
incentivized to do so,” Nelson said. “Whilst pure economics
are unlikely to be sufficient, they do represent an
opportunity to decarbonize liquid fuels.”
Furthermore, Nelson pointed out that innovation milestones “EVs are forecast to reach
and other factors will influence EV market development.
a point in which they can
“EVs are forecast to reach a point in which they can
compete on cost with their ICE equivalents in the next compete on cost with their
decades,” said Nelson. “These forecasts are based on
critical assumptions around the cost of batteries, the ICE equivalents in the next
technologies for battery manufacture, and the cost of the decades”
energy infrastructure. Another consideration will be the
degree to which the grid has been decarbonized.” Robin Nelson, Science Director, Concawe

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6
Pathways to Greater
Coexistence?
Although the response breakdowns to survey questions respondents advised exporting more to developing markets
up to this point reveal pockets of skepticism about EV while 8.3 percent indicated other reasons.
market growth potential, a fair number of respondents also
According to Pullan, refiners can be proactive and
expressed that they have become more receptive to the
leverage their well-established businesses and
non-ICE-powered vehicles. When asked if their views
widespread retail networks – and perhaps even partner
on EVs had changed over the past two to three
with EVmanufacturers – by looking for new products
years, a plurality (43.1 percent) selected the response
to sell to customers. For example, refiners – MOL
“Yes, I am now more optimistic about them than before.”
included – have already gotten into the car-sharing
In comparison, 16.7 percent chose “Yes, I am now more
business. In the case of MOL, the shared vehicle fleet
worried about them than before.” The remaining 40.3
will increasingly consist of EVs. The increased popularity
percent indicated that their views on EVs had not changed.
of car-sharing does come with a price, however. Pullan
Regarding whether their respective companies had a stated that original equipment manufacturers – automakers
strategy in place to adapt to the emergence of EVs, – likely have the most to lose from this trend.
the responses skewed negative: 55.6 percent responded
“From our side, what we can forecast is that the amount of
“No” and 44.4 percent indicated “Yes.” Survey participants
kilometers will increase with this trend,” Pullan said, adding
did, however, signal some sort of proverbial silver lining. On
that vehicles will need to refueled somehow – regardless of
the question of whether they think any scope exists
whether they use an ICE or an electrical motor.
for refiners to view EVs as an opportunity, only one
out of four respondents answered “No.” Because there “On the long run, a smart energy management system will
were three affirmative options, however, survey participants be established,” Pullan added. “Refineries can leverage
answering “Yes” did so for different reasons. Among the 75 some advantages from it, when they will get the required
percent in the “Yes” camp: electricity and from where – two-way charging, for
example.”

44.4%
chose the answer “Yes, the electricity
required by EVs will have to come from somewhere”
In Nelson’s view, how well a refiner can leverage any
potential advantages will depend on the refiner.
“A clear opportunity for some, but this becomes more
company-specific,” concluded Nelson. “Refiners integrated
with a retail network may be better positioned than the

16.7% indicated “Yes, the production of EVs

will increase demand for refined products”
merchant refiner. In the widest sense, EVs will impact the
demand for gasoline and diesel as part of the overall drive
to decarbonize transport.”

13.9% selected “Yes” for other reasons

When queried about how refiners can adapt to the

potential impact of EVs, nearly seven in 10 respondents
selected “Invest more into petrochemicals” (34.7 percent)
or “Become less reliant on crude as the refinery feedstock
and look to renewable hydrocarbons” (33.3 percent). The
third most popular answer to this question, garnering
16.7 percent, was “Continue as normal, EVs are still only
an emerging technology.” Approximately 6.9 percent of

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 Where our responders
came from
As a point of reference, the largest share of 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 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.”

7.8% 46.75%

10% 7.8% 27.3%

8 www.wraconferences.com
 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, Sabic, Total, Borouge, Grupa Lotos, and others
have provided WRA with a valuable refiners’ perspective on evolving electric vehicle (EV) and
broader personal mobility trends. Below are some highlights that WRA has gleaned from
these high-level meetings.

• Decarbonization is the ongoing central goal of

public policy discussions that affect refiners, both
in Europe and elsewhere. Policymakers consistently
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.
• 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
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.
• The admonition to strategize 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 potential
– 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 satisfy
increasing demand in, say, China and Africa.
These regions will still need refined fuel products
– for automobiles, bunker fuel, jet fuel, and larger
trucks – for years to come. In addition, recognize that
producing EVs (think: polymer auto parts) still requires
refined products.

• With forecasts that EVs and other forms of

mobility not powered by petroleum-based fuels
will gain wider public acceptance, refiners will
need to strategize 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.
• 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
implementation of pure EVs.

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