SPEECH: Liquid Gas UK Annual Conference – Elizabeth de Jong

Delivering Net Zero through sustainable systems

Good morning to you all and thank you to George and the team for giving me the opportunity to speak to you here in Edinburgh 

My name is Elizabeth de Jong, I’m the new(ish) CEO at United Kingdom Petroleum Industry Association (UKPIA) having joined in April.  

Despite my short time in the sector, it is very apparent that there is an increasingly clear vision for the downstream sector and how it will transform in the coming years.

I’ll be outlining how we at UKPIA see that future, highlighting where our and Liquid Gas’s vision align, and also flagging some of the challenges that we are both going to meet on this journey.

Today we face some of the biggest issues for a generation, and possibly for many generations.

We are living through the biggest energy crunch seen in many years, caused by two things happening at once. The need to wean ourselves away from fuels that support the Russian war in Ukraine.  And the shift from fossil-based systems of energy production and consumption to renewable energy sources.

Despite these challenged times, or perhaps because of them, it is very clear that the downstream sector has a critical role because the fuels we supply are vital to both the UK’s economic activity and its energy security.

We have considerable assets to provide these, including 6 major refineries, 60 terminals, 3000 miles of pipeline and over 8000 forecourts across the country

We distribute around 96% of the UK’s transport fuel (via domestic production at our refineries and via imports).  But of course our products extend to others sectors too, notably in off grid heating and chemicals, but also in many other dependent areas.

We do this via an effective open market that has historically ensured supply and demand are aligned at globally competitive prices. Sometimes that expertise, that massive sunk investment, as well as the efficiency of this system, can be taken for granted and its importance overlooked.

As well as the day to day business of supply, we’ve also seen that the sector can respond to the unforeseen. This past year especially so by reducing Russian imports to zero in just a few months. Given that change, alongside the difficulties of managing oil protests like Just Stop Oil, we’ve also shown that we can be hugely flexible too…

By virtue of our existing scale, location, expertise and investment, and importantly by our ability to respond to change, our industry has the potential to enable large emission reductions not just in its own sector, but across other industries too. 

The future could be very bright - the UK offers many advantages in terms of transition to Net Zero, which could make it a world leader.

We have good proximity to European markets and strong import and export infrastructure.

We also have transferable expertise from both the upstream and downstream oil sectors which can support key technologies such low carbon fuels.

For some of my companies who have massive scale and therefore opportunity to reduce their emissions, we also have a great advantage in the North Sea, which is now a mature basin and gearing up for a new lease of life as a store for captured industrial emissions.

But despite those potential advantages, despite having a better idea of what a decarbonised downstream sector could look like, we are not yet seeing the grand plans that are going to get us there.

We will need some more leadership from government on this, and while they have been rather distracted in recent months, we can etch out a picture for them of what is needed if we are to reduce emissions across the whole of our sector as well as beyond.

If our industry is to meet net zero, then we cannot just rely on energy efficiency measures, or a bit of biofuel, or even capturing carbon from the big stacks at a refinery. We need to be looking at the whole system.

Reducing our emissions by making operational efficiencies, will make a difference.

We can also change the energies we use to make the fuels (we moved from coal, to liquids, to gas – now it’s probably to low carbon hydrogen)

We’ll also need to capture the emissions that cannot be removed in any other way.

But even all of that is not going to get us to the Net Zero the government now requires… Ultimately, in our sector we need to look at the base of what we do and move from fossil-based products to renewable sources of hydrocarbons.

It’s only through such a fundamental set of changes that we will have a continuing role in a net zero economy.

So for such fundamental change, we strongly believe that a systems-based approach is needed – a new way of delivering change – and policy - which looks at the transition across all aspects of the economy rather than its individual components. This will be critical if we are to efficiently achieve Net Zero.

It is only through looking at systems that we can deliver a truly competitive UK, rather than what we have today where emissions reductions, energy security and affordability are competing with each other.

Instead, we want to see a technology neutral policy which says here is a target – prove to me that you can meet it!

That allows heat pumps to compete with Hydrotreated Vegetable Oil (HVO) or bioLPG. It allows efficient diesel engines to switch to HVO rather than having to change operations because Electric Vehicles (EVs) ‘must be the answer’.

We also want a policy environment where UK investment is rewarded rather than punished.

Where there is no longer a market incentive to spend capital in Russia, with lower costs, no carbon plan and lower standards. But instead, a reward for building here to stop carbon leakage, to maintain jobs across the country, and build our supply chain resilience by making ourselves self sufficient once again.

If we can secure UK investment we can meet all those challenges of the sustainability / security /price trilemma.

It is not easy though, given the scale of the challenge.  To make all of our businesses viable for the long term, but also to make Government help us get there, we need to work together.

So UKPIA’s goal, similar to that of Liquid Gas UK, is to make sure our voices are heard by Government.

Government’s job is to design mandates, incentives and consider the challenges of competition from our closest competitors. And, to help them do that effectively, we as a wider industry – not just refiners or forecourts, not just the heating or the transport bit - need to make sure Government sees us as an equal partner at the table offering something they want, so we can utilise the vast assets and transferrable skills we have to bring new products to market.

The Government needs to be open to all technologies to effectively achieve Net Zero.

Studies have concluded that vehicles powered by the internal combustion engine will be around for a long time despite phase out dates - and it will be the same for gas or combi boilers despite government’s announcements to phase those out too. These vehicles and the technologies with which we currently heat our homes and businesses can offer a decarbonisation solution if a technology neutral approach is taken.

We are seeing growing volumes of bio-products in the UK.

Blending larger volumes of biodiesel and bioethanol into our fuels removes the equivalent 2.5 million cars off the road in terms of greenhouse gas (GHG) emissions And that 2.5 million cars equivalent is significantly more than the 1 million electric and hybrids currently on the road.

It’s a similar story for biogases where people in this room will be among those who have spent over £100 million with the new Teesside plant to increase the availability of renewable liquids and gases.

Yet despite the progress, we still see that policies could be doing more…

On transport fuels, we strongly believe the Renewable Transport Fuels Obligation should move from its current volume approach to a greenhouse gas emissions approach, where the obligation is met by reducing carbon dioxide emissions by a set amount. This would incentivise the best-performing low-carbon fuels and increase these carbon savings from cars.

Of course if the transport fuels are being decarbonised then we will also see increased production of other products which come with their manufacture.

And it is this opportunity that I think current policy misses. The Department for Transport (DfT) will focus on decarbonising transport, but doesn’t, or perhaps doesn’t yet, realise that promoting investment in renewables in one area actually incentivises investment in all renewable fuels.

We hope that the low carbon fuels strategy they have been working on this year will be able to break through this barrier and - for the first time - promote emissions reductions from renewable fuels with a truly technology neutral (greenhouse gas-focussed) approach and open eyes to the system-wide benefits that it can bring.

If we can get DfT to see those benefits, then the progress today could speed up tomorrow.

Seeing renewable fuels – whether they be renewable dimethyl ether (rDME), bioLPG, biodiesel or HVO – not just as a bridge but a key part of the net zero destination could open up policies that can really make those fuels competitive.

GHG based duty rates or Value Added Tex (VAT) reliefs would be a real game-changer and also help customers properly focus on reducing their carbon emissions and make informed decisions whether they want to pay for gas, renewables, invest in insulation or even install a heat pump.

Today it is clear that the focus for government is fuel security.  As the then Prime Minister Boris Johnson said in August 2022 ‘we’re paying in our energy bills for the evils of Vladimir Putin.’ The Energy Security Bill, states that ‘one of the Government’s top priorities is to ensure that the UK has a secure and reliable energy supply.’

While this year has been a challenging one in terms of managing supply and demand, we may well see it get harder, as despite efforts across the globe to build inventories, the need to phase out Russia gas and oils means that there simply is not as much liquidity in the markets as normal.

Yet if we can pull through the next few months – using our existing infrastructure, expertise flexibility – and determination – then reducing our reliance on Russia may yield benefits for the UK in the long term.

At first sight, it might appear that fuel security and Net Zero are two requirements that pull in different directions. But if we can attain the investment needed to reduce our emissions then it is likely that the UK can successfully navigate both of those challenges. Under such conditions, we will be able to deliver the fuel products our economy and society require while developing our low carbon options to meet Net Zero goals.

So - our sector wants to help find solutions to some of the biggest challenges our industry, democracy and society is facing.

A systems-based approach which ensures that Government mandates and incentives are aligned and pull in the same direction will be critical in achieving the goals of the downstream sector.

We are in a decent place, but the next three years are critical for policymaking if we are to keep investment in the UK

For companies to continue to invest in low carbon production in the UK, the investment conditions need to be attractive and competitive relative to those in other countries where businesses could invest their money. 

Ensuring a strong domestic sector by offering strong incentives to invest in the UK is the best – perhaps the only - way to deliver Net Zero and protect the UK’s energy needs. 

Thank you

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