SPEECH: UK and Ireland Fuel Distributors Association (UKIFDA) Conference - Elizabeth de Jong

While we’ve seen changes in politics, the really important business – that of supply chains delivering products and planning their future business – continues efficiently (having weathered the Russia storm for now) and - with regards to Net Zero are picking up pace.

As we look towards the future, the fuel industry is clearly going to change – that is the strategic direction of which we can be certain. We are on the road to net zero.

If our sector is to continue to have permission to operate then we are going to have to do business in a way that is more sustainable to be compliant with the Net Zero legislation the UK has had since 2019.  Regulators and increasing pressures from Net Zero mandates and legislation will mean that doing what we do now is not likely to be an option in the future.

Happily, there are many technology options out there that can deliver low carbon liquids.  

UKPIA’s refining members are looking seriously at how to reduce our own emissions – which will be in large part through CCUS and hydrogen (in all its many colours). These technologies will decarbonise the beginning of the supply chain and therefore reduce the emissions of all the products which are sold downstream.

Changing the feedstocks will also make a big difference in terms of carbon emissions…We’ve heard lots about HVO already today.

Low carbon fuels can come from biofuels, whether that be vegetable oils, recycled crisp packets, or tyres. But there is often too much focus just on biofuels and concerns about their availability. There are many more routes to sustainable liquids, and I suspect we’ll use many of them. In the longer term it might be possible to use captured carbon with green hydrogen to produce truly synthetic fuels which have the potential to be carbon neutral.

But we cannot assume that producing and distributing low carbon fuels will guarantee our future. We know that there is scepticism across government about any potential roles for fuels – with other new technologies like batteries in vehicles and heat pumps in houses seen as the be all and end all.

UKPIA doesn’t think that will work. One of the great benefits of oils has been their versatility: that they can be used in applications from heavy industry, to shipping, from home heating to lawnmowers. And few – if any – of the new technologies are likely to be able to offer all things to all people.

With falling demand, investors could easily look elsewhere. If we cannot secure investment in the UK’s manufacturing sector then our capability will erode and our reliance on imports will increase and with it the risk of supply shortages and volatile prices, as we’ve seen with gas this past year

That’s why it’s important that we continue to work together to fight for the important role that liquid fuels can play.

If we can secure a role for low carbon liquid fuels, we can attract investment in fuel manufacturing – securing the UK’s supply as well as the high quality jobs and long-term economic stability that comes with it.

Our government is keen to say that the UK is ‘world-leading’ in terms of Net Zero and by some measures we are – however, there are signs that the UK is becoming a less attractive place to invest. Certainly the US and the EU have made announcements to tempt increased investment in low carbon technologies. And these are against a background where UK industrial costs are already pretty unattractive against our competitors.

Our gas prices are historically high and have spiked since the start of the invasion of Ukraine. And while the UK has cheaper gas prices than Europe thanks to our LNG infrastructure and the North Sea, our prices are much larger than those of the US which still benefits from fracking.

It’s a similar if not worse story for electricity, where the UK government has asked bill payers – domestic and businesses - to subsidise the move away from fossil fuelled power plants, without having the cost base advantages of the French nuclear or US fracking. The higher prices are likely to be here to stay as the Grid will need to massively increase its capacity for electric home heating and electric cars.

And then we take a look at our carbon pricing, which I heard an energy minister state at the Conservative Party conference last year was ‘world-leading’ – but which I can only assume he meant ‘world’s highest’. Due to policy decisions the UK made as we left the EU, the UK’s carbon price has been more expensive than even the EU’s Emissions Trading Scheme and often surpasses £100 per tonne.

In truth it looks like the UK is falling behind in the global race for investment.

There is a real risk that we see the UK’s fuel capability and capacity – whether it be manufacturing, importing, distribution or elsewhere in the supply chain – fall more quickly than demand falls – exposing us to higher supply risks.

This capability and capacity is important.  It enables us to react quickly and in a relatively smooth way to external shocks.

For instance the UK supply chain was able to pivot quickly last year, removing millions of tonnes of Russian diesel and other products from our use. Assisted by the public’s willingness to accept some additional costs in order to confront the Russian invasion, we were able to produce more fuels with the UK’s refining assets, we were able to import volumes from the US, we were able to draw down our stockholdings.

The sector showed it was strong enough to adapt to huge change. Government could rely on the incumbents -  our businesses – to come up with solutions, to use our vast infrastructure, proven skills, expertise and contact books to make the change quickly - and without politically unacceptable fuel shortages.

We want to play this role to deliver the Net Zero future.  The big players are needed for such a huge change. Government often courts the start-ups, but our industry is full of problem solvers, of well-establish companies well used to dealing with risks and issues, and making huge changes delivering solutions to the biggest problems in short order.

Looking forward, I believe that we as an industry need to be united around two simple messages:

Firstly, that low carbon liquid fuels – in all their forms - are part of the solution to meeting Net Zero – rather than a threat to it. We have the technologies, capability and will to transform the sector from one that is fossil fuel based to one where sustainable feedstocks become the norm. We can offer decarbonisation today – using existing built infrastructure and supply chains, which can save carbon immediately while the wider economy is building its other low carbon options like heat pumps and EVs that can and should operate in tandem rather than instead of low carbon products.

And secondly, that the best way to ensure our energy resilience – both for the UK as a whole and for each region separately - is to ensure that the sector can remain profitable so that it can both survive and invest. Working with government to ensure that the incentives are there for the sector to continue to invest in the UK is vital so we can maintain a resilient supply chain now and in future.

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