Oil refiners in Europe bet big on biofuels

Europe’s oil majors’ ‘big bet’ on hydrogen as the transport fuel for the future is not so big in reality, according to a new study on behalf of Transport & Environment (T&E), which shows that investments in biofuels refining are eight times bigger.

T&E accuses oil producers of not being serious about investing in genuinely clean fuels, but choosing the easy, unsustainable biofuels option.

Where Europe’s oil giants Shell, BP, Total, ENI and Repsol are investing in hydrogen, only part of this is truly ‘green’. Most of their investments are going towards decreasing the carbon intensity of their refinery operations, not for developing green transport fuels, the study shows.

Oil demand for road transport in the EU will fall by almost a third in 2035 as more cars switch to electric, the study shows. From 2035, demand for petrol will continue to drop 5% year on year. Much current refining capacity will need to close or, to avoid becoming stranded assets, be converted into processing alternative fuels.

Of the refining sector’s €39 billion in planned investments for alternative fuels up until 2030, almost 75% will go towards increasing biofuels production. €2 to €3 billion will be invested in new advanced biofuels (HVO) plants alone, doubling production capacity to 10 megatonnes by 2030. This is four times higher than what can be sustainably sourced in the EU, according to T&E’s analysis. This will likely lead to limited ‘waste’ products like animal fats being taken from other industries, as well as mass imports of dubious used cooking oil from abroad.

Oil refining is one of the main users of hydrogen today, with most using carbon intensive grey hydrogen made from fossil fuels. According to the study, oil companies are investing around €6.5bn in so-called ‘low carbon’ blue hydrogen to clean up their production processes. This is double what they are spending on producing green hydrogen and e-fuels, which could be used to clean up aviation and shipping.