Biofuels are key to emissions reductions in a number of hard-to-abate sectors

Mboe per day

8

6

Trucks

Rail

Shipping

Aviation

Passenger cars

Biofuels play an increasing important role in the SDS: production quadruples from around 2 mboe/d today to almost 8 mboe/d by 2040. In 2040, biofuels account for around 10% of global liquids demand.

Biofuels are used almost exclusively in the transport sector in this scenario. Consumption in passenger cars grows by around 2 mboe/d from today’s level to a peak level of around 3.7 mboe/d in 2035. After 2035, there is a slight dip in the use of biofuels in passenger cars. This is due in part to the increasing electrification of the car fleet, but it is also because biofuels are needed elsewhere in the system as they provide an increasingly important mechanism to reduce emissions from the hard-to-abate aviation and shipping sectors.

Today the use of biofuels in aviation and shipping is limited, but there are few low-carbon alternatives to biofuels in shipping (hydrogen and

LNG play some role in the shipping sector in the SDS) and no other viable low-carbon fuels to reduce emissions from aviation.

On the supply side, the majority of the 1.8 mboe/d of biofuels produced globally today use “conventional” methods of production. Concerns have been raised about the sustainability of these methods in some countries, as the feedstocks required can compete with food production for agricultural land and there can be a large increase in CO2 emissions intensity associated with land clearing and cultivation.

As a result, there is increased interest in advanced biofuels, which can avoid these concerns. Various materials can be used: waste oils, animal fats, lignocellulosic material such as agricultural and forestry residues, and municipal wastes, and all are the subject of current research programmes. If successful, the results of these research programmes

could lead to huge potential increases in biofuel production. Many of the oil and gas companies have active R&D programmes in these areas.

We estimate that today there are around 10 billion tonnes of lignocellulosic “sustainable” feedstock that could be used for biofuels production worldwide. The 8 mboe/d of biofuel production in the SDS would only need around 15% of the available feedstock.

While large volumes of advanced biofuels could be produced sustainably, their development and deployment has been slowed by their costs (relative to both conventional biofuels and oil). Conventional biofuel feedstocks can often be harvested close to production centres; they have a higher energy content, and they often have a low level of contaminants so handling and treatment can be relatively inexpensive and simple.

By contrast, advanced biofuel feedstock tends to be spread over a larger geographic area and of variable quality. Producing a barrel of advanced biodiesel costs around USD 140/barrel today. Assuming that this results in no net CO2 emissions, a carbon tax above USD 150/t CO2 would be required for such a biodiesel to be cost-competitive with diesel refined from crude oil. The future of advanced biofuels therefore will depend critically on continued technological innovation to reduce production costs as well as stable and long-term policy support.

The response of the world’s largest oil and gas resource holders to the prospect of falling demand for carbon-intensive fuels is a critical issue for energy transitions. These countries are always likely to seek out opportunities to monetise these resources. Their development could be made compatible with global aims to reduce emissions either by expanding non-combustion uses of hydrocarbons or by converting the hydrocarbons to zero-carbon fuels to be delivered to consumers.

One option to expand the non-combustion uses of hydrocarbons is to increase the direct production of chemical products relative to transport fuels. Recently, a growing number of companies are making efforts to integrate refining and petrochemical facilities, with an aim to increase chemical product yields beyond the typical levels. There are even more ambitious schemes being pursued to produce chemical products directly from crude oil, with traditional refinery outputs (such as gasoline or diesel) becoming by-products of this process. The first planned

“crude-to-chemicals” complex is currently being designed by Saudi Aramco and aims to convert 40-45% of crude oil to chemical products.

A second project aims for a higher yield and is being developed based on new thermal cracking technology. These schemes could challenge traditional upstream, refining and petrochemical businesses, especially in the event that demand for transport fuels wanes while petrochemical uses remain strong (as in the SDS).

One option to convert hydrocarbons to zero-carbon fuels is to produce hydrogen from the oil or natural gas and to capture, use or store permanently the separated CO2 or carbon. Two ways to do this are:

•“Methane reforming”: this is the most common method, in which methane is converted into pure streams of hydrogen and CO2 at high temperature and pressure. The pure stream of CO2 can be

captured at relatively low costs, which would then need to be stored underground or incorporated permanently into other materials.

•“Methane splitting”: whereby methane is converted into hydrogen and solid carbon (also called “carbon black”). The carbon black can be buried or used to produce rubber, tyres, printers or plastics. The splitting could be performed either close to the production site, which would require new hydrogen transmission and distribution infrastructure, or close to the point of end use. The latter production route could make use of existing gas infrastructure to transport and distribute the methane and so may be the more cost-effective option (although it would rely on the consumer handling the carbon black). Methane splitting has received interest from a number of countries and companies, although it is still at a very early stage of development and a number of challenges still need to be resolved.

To illustrate the volumes of CO2 that could be involved, one can look at the CCUS requirements that would be compatible with large-scale production of oil and gas in selected major producers.

For example, in 2040 the Middle East produces 36 mb/d oil and over 1 tcm of natural gas in the STEPS, compared with 22 mb/d and

650 bcm in the SDS. If these countries were to produce at the higher levels of the STEPS without additional emissions, and assuming that there is large-scale demand for hydrogen, then around 14 mb/d oil and

350 bcm natural gas would need to be converted to hydrogen. This would produce almost 3 000 Mt CO2 each year. Today, there is around

35 Mt CO2 captured globally, meaning that CCUS deployment would need to scale up by a factor of 100 within the next 20 years.