Ahead of the marcus evans Petrochemical & Refining Summit 2022, Fernando Valle discusses his outlook on the energy industry and how refineries can prepare for the changes that lie ahead.

1. Interview with: Fernando Valle,
Senior Analyst - Oil & Gas, Bloom-
berg Intelligence
“Predictive maintenance will be a game-
changer in the next five to ten years.
There is a lot of opportunity for refiners
to improve both performance and
commercial output by focusing on
predictive rather than preventive
maintenance,” says Fernando Valle,
Senior Analyst - Oil & Gas, Bloomberg
Intelligence.
Valle is a speaker at the marcus evans
Petrochemical & Refining Summit
2022.
What is your outlook on the energy
industry? How is energy transition-
ing?
There are two paradigms, short-term
pressure from governments and society,
especially in developed markets, to
lower emissions and carbon footprint,
but doing so while helping emerging
markets develop. That will have a huge
impact on what the energy mix will look
like in five to ten years. We are seeing
some of the adverse impacts of closing
in Europe, with gas and electricity prices
rising significantly. The European crisis
highlights the ongoing need for oil & gas
as a crucial part of the transition, and to
developing technologies to lower
emissions from oil & gas. At the same
time, we need to improve the issues
around renewables, whether it‘s
batteries or how solar and wind are
captured.
We are still not able to rely solely on
renewables. In the near term, oil & gas
are still a critical part of the energy
matrix, and the biggest challenges are
regulatory and investor support. They
are putting a lot of pressure on some oil
companies to shift investments.
How can refiners prepare for these
changes?
Anything they can do to increase their
clean product yield, lower sulphur and
emissions associated with their through-
put will be advantageous. It is im-
portant to maintain flexibility, both on
the crude sourcing and the product side,
being able to search for new markets
and maximizing which crude grades
they can refine. Ultimately, it comes
down to their location. In some states,
the regulatory environment is too
challenging for refineries to continue to
run the way they do.
Are regulations too focused on
refiners? Will this continue?
The closer you are to the consumer, the
more scrutiny you will see. Refiners are
closer to the consumer than upstream
producers. That has always been one of
the issues. It is not necessarily that
regulators are too focused on refineries,
but it is easier to target them from a
compliance standpoint, as there are
fewer refiners than wholesalers or
retailers. That will continue as it is
difficult to maintain oversight over
thousands of smaller players, rather
than a few hundred.
What new fuels and technologies
are on the way?
We are seeing a lot of investment into
renewable diesel, which is interesting,
as it is chemically identical to fossil fuel
diesel, but supported by regulatory
credits both on the state and federal
level. The incentives support the
margins for many of these refiners. We
are building almost seven times the
existing capacity for renewable diesel,
so it is questionable whether those
margins will stay high once all of these
plants are up and running around 2025.
At the same time, at least there is no
chance of oversupply for renewable
diesel, as it does not need to be segre-
gated like biodiesel.
What digital transformation efforts
should they make? Are some of
them slow in this transformation?
There are leaders and laggards as in
every industry. Putting sensors in your
capacity is one of the low-cost invest-
ments you can make, so you can have
more predictive maintenance, fewer
flares and discharges from your capaci-
ty. Putting more sensors and data
capacity behind the refineries would
help determine the optimal time to
conduct a turnaround, to prevent any
upsets in your units, which will help you
save money as well as scrutiny from
regulatory agencies. You will improve
your relationship with local and state
governments. Sensors play a big part in
strengthening asset performance and
reliability.
How can refiners reduce operating
costs and increase profits?
The biggest issue right now in the US is
natural gas and electricity cost. To the
extent that plants do not have co-
generation units that can reduce the
amount of heat and power needed to
generate independently, those would be
worthwhile investments. Low natural
gas prices brought on by US shale is
going to remain a tailwind over the next
few years against European peers. But
it’s still important to lower overall
operating cost for refiners, so the more
automation and predictive maintenance
they can do, the more they can shave
off those valuable cents on their
operating cost. The impact of predictive
maintenance is especially important for
capital costs, which are very significant
for refineries and any downtime they
experience is missed production.
Investing in predictive maintenance will
be critical.
Any final words of advice?
Do not wait for regulations, they are
coming. Prepare by improving your
commercial options, investing in
predictive maintenance and analytics
that improve your commercial standing
and ability to source advantageous
crudes, and optimize your yield.
Investing
in predictive
maintenance
will be critical
How Refineries Can Thrive
Over the Next Decade

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