Energy Transition and what it means for the European midstream operators

Energy Transition and what it means for the European midstream operators

Published on February 5, 2024

1. Midstream storage providers will be key partners/enablers of Energy Transition 

Increasingly, partnerships, MoUs and offtake agreements are being announced for low-carbon products with the need for storage logistics to connect supply with demand. Operators are looking to re-invest and repurpose storage to meet their new requirements. Midstream storage providers with their prime locations in port locations and regional hubs, licences and permits, and know-how will be vital enablers.

2. Regulation around green products is continually developing 

European mandates are continuing to expand with more aggressive targets that are outpacing forecasted demand. Energex is taking part in assignments to help our clients navigate the effect of policy and regulations spanning traditional hydrocarbons to biofuels, low-carbon products and CO2. For example, Energex worked with a large global bunker supplier on their carbon strategy and to design and implement an operating model to allow support of bunkering customers to comply with EU ETS regulations.

3. Europe will look to imports of low-carbon products and exports of CO2

With the limited production capacity of green fuels and feedstocks in Europe, the energy transition will likely be import-driven to cover supply deficits. This means that import terminals will have continued strategic importance and producers with access to feedstocks will be well positioned to make good margins. Energex has seen this on a recent assignment which explored the commercial feasibility and margins of upgrading HVO to SAF.  Carbon-intensive industries will struggle to decarbonise and hence aggregation and export of CO2 for CCS will be part of the overall solution.

4. There is not simply going to be one solution for decarbonising 

The pace of energy transition will be sector dependent meaning there will be a diversity of products feeding into different sectors at different rates. This means there will not just be one transition strategy for operators rather a transition timeline to service different projects within the short, medium and long term.

5. Each asset will play a part in the transition according to their individual attributes 

Midstream operators that possess diverse and flexible infrastructure will be best placed to service demand. Diverse tankage, availability of modality, access to land and permits will be key enablers. Operators must be able to explore options for energy transition based on these parameters. Energex have been working with many Northwest European storage providers to assess the best strategic pathways for our clients and assessing commercial feasibility of some selected transition projects.

Written by Jason Rajah, Partner:

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