Midstream and downstream
As the upstream sector focuses on oil production from easier-to-develop resources — such as onshore shale oil, and conventional oil in the Middle East, Russia and Venezuela — processing demand will increase in the midstream and downstream oil systems.
Larger amounts of oil will be transported by pipeline to local storage facilities and refineries, increasingly catering for a local, rather than global, liquids market. We will see an increase in storage for oil, gas and intermediate products as countries strive to add value to oil resources locally, and to reduce the carbon footprint of transporting base materials. As an example, data from data from the Oil Companies International Study Group for Conservation of Clean Air and Water in Europe (CONCAWE) shows 21 refineries have closed in Europe since 2009, with a reduction in capacity of more than 2 Mb/d of refined crude oil.
Globally, oil refinery products output will increase slowly to reach a high by 2022, at 3.4% above 2017 levels. This will be followed by a substantial 45% decline in output by 2050. This is due to significantly reduced demand for liquid fuels in the transport sector. We expect greater refining sector focus on producing cleaner, higher-grade transport fuels in mature markets with existing infrastructure. Transportation of refined products is likely to decline as refinery capacity adjusts to delivering only what local markets need. Greater proportions of refinery output will be directed towards the petrochemicals sector as feedstock rather than fuels.
Refiners face an increasing challenge: how to maximize returns per barrel processed. We expect the ‘heavier’ end of the barrel to struggle to find markets in the future because of substantially reduced demand for diesel and maritime fuel oil. This creates new economic and environmental challenges for refiners in what has historically been a low-margin business. Only the most advanced refineries, with the most efficient processes, are likely to survive these challenges.
Among the regional trends that we forecast, new petrochemical investments in the Middle East will be increasingly based on cheaper, liquid feedstocks such as naphtha and gasoil, or mixed gas/liquid feedstock, instead of exclusively on gas. We expect North America’s low-cost feedstock advantage of recent years to decline slightly as new ethylene-cracking capacity and export opportunities boost demand for ethane and propane, which could increase prices. Substantial petrochemicals growth in China and India, driven by local GDP growth, will increase demand for gas imports, mainly sourced from Middle East and North American exports.
Gas trade forecasts and other results from our model support the requirement for new pipelines including those for cross-border transmission; and, significantly increased demand for liquefied natural gas (LNG) terminals of varying scale (liquefaction and regasification terminals, fixed and floating assets). We predict seaborne natural gas trade (LNG and liquefied petroleum gas combined) to more than quadruple, from 383 million metric tonnes per year (Mt/yr) in 2017 to 1,604 Mt/yr in 2050. A shift in gas transportation trends towards increasing diversity of supply will also drive globalization of markets for gas trading, particularly in the form of LNG.
With gas demand set to remain strong until at least 2050, we expect increased expenditure on, and activity associated with, older pipeline systems in several regions, including Europe, Middle East and North Africa, North America, and North East Eurasia.
In several countries, pipeline systems and compressor networks will continue to be repurposed and undergo changes of service due to shifts in where gas is produced and consumed. This will be driven by new gases (e.g. hydrogen and biogases) entering gas networks at local distribution level, and by a growing share of LNG imports over traditional, piped gas from offshore locations.
Gas transmission system operators will progressively incorporate advances in composite materials, artificial intelligence, robotics, augmented reality and the Internet of Things into systems and processes. This will assist them to build, maintain, repair and operate networks safely and cost efficiently, and to provide customers, regulators, and partners with tailored analyses of large volumes of operating data.
As new gases enter gas distribution networks, customers will increasingly buy units of energy rather than volumes of gas. Metering and billing will require more accurate and consistent measurement of the energy value delivered to end users. Greater computing power and more advanced data analytics will allow gas distribution system operators to manage more complex data and customize results for internal and external stakeholders.
Globally, we forecast a drive to decarbonize production and optimize lifecycle performance for existing and new-build facilities throughout the refining and petrochemicals sectors. Greater and more sophisticated digital technologies such as autonomous plant operations, and more efficient electrical drives and controls, will assist these efforts. We also foresee an increase in the creation of low-carbon industrial clusters sharing by-products such as hydrogen, and for CCS and carbon capture, utilization and storage (CCUS). Utilization of CO2, an emerging area of interest, is the process of ‘locking up’ CO2 in products such as plastics or concrete, or of using the CO2 for processes such as enhanced oil recovery, or the production of chemicals such as formic acid.