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Editorial comment

The recent study into climate change by the UN’s Intergovernmental Panel on Climate Change (IPCC) paints a bleak outlook, and demands change from government leaders and stakeholders ahead of the COP26 conference in Glasgow, UK, later this year.


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The recent study into climate change by the UN’s Intergovernmental Panel on Climate Change (IPCC) paints a bleak outlook, and demands change from government leaders and stakeholders ahead of the COP26 conference in Glasgow, UK, later this year.

We all know the vitally important role that the downstream sector has to play in helping to reduce emissions. And we all know that embracing change is absolutely essential to the future of our sector (and our planet). But we also know that our industry plays an indispensable role in modern society; a fact that is often forgotten (turn to p. 5 of this issue for a Guest Comment from Chet Thompson, President and CEO of the AFPM, who explains more)

Shortly before the IPCC released its report, McKinsey & Co. published its ‘Global Downstream Outlook to 2035’, which considers the long-term challenges for the downstream sector brought about by technological advances, evolving regulations and increasing concerns about climate change. It examines the future of the sector through the lens of three potential scenarios: energy transition (reference case), delayed transition, and accelerated transition. It suggests that demand for light product (gasoline, diesel/gasoil, and jet/kerosene) will plateau by the mid-2020s, even in the delayed energy transition scenario. The report forecasts that demand will fall by 2.8 million bpd from 2019 levels to 2035, based on current trends, rising to 11.7 million bpd if the energy transition accelerates. Light product demand is expected to fall most sharply in North America and Europe.

McKinsey based its prediction on six major shifts that it sees impacting long-term global energy demand: the uptake of electric vehicles, efficiency gains and the uptake of low-emission fuels for aviation and marine, increased demand reduction and recycling of plastics, cost reductions for renewables and storage, electrification of residential heat, and electrification of EU industry low and medium temperature heat.

However, the report suggests that while the industry is expected to contract in some regions, it will remain very large in all scenarios. The global refining sector is still expected to produce 94 million bpd of liquids in 2035, even in the accelerated energy transition scenario.

Tim Fitzgibbon, Senior Expert at McKinsey, stressed that it is essential that refiners adapt to build in resilience to a rapidly changing downstream sector. He suggests that refiners should embrace digitalisation, while potentially investing in decarbonisation and better integrating into petrochemicals. Fitzgibbon explained: “Many refiners can capture pockets of growth by directing investments both into emerging markets and further down the value chain. They should also consider placing big bets on emerging value pools including new energy services, new mobility and advanced fuels. These shifts are essential to achieving every penny of potential profitability as the product and geographical market mix shifts beyond recognition.”


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