Viva Energy’s oil refinery in Geelong, Victoria could be turned into an “energy hub” incorporating solar + storage – but also more fossil fuels.
Operating since 1954, Geelong Refinery is situated on 235 hectares of land adjacent to Corio Bay and is one of just four refineries remaining in Australia. According to Viva Energy, it supplies over half of Victoria’s and 10% of Australia’s fuel.
The coronavirus pandemic had a significant impact on its operations, with demand for petrol decreasing and jet fuel demand falling off a cliff. Back in April the company announce it was shutting down major processing units and scaling back output. Yesterday Viva said it was to commence a major maintenance program while units are already shut down and refining conditions remain weak.
The company also announced it was looking into diversifying with a number of potential future energy development projects that could be co-located with the refinery.
LNG Terminal, Alternative Fuels
“Our early focus is on the development of an LNG supply and storage facility to bring natural gas from production fields in other parts of Australia, or further afield, to where it is needed in Victoria and south east Australia,” said Viva Energy CEO, Scott Wyatt.
Development of an LNG import terminal would involve an extension of the existing Refinery Pier, the mooring of a Floating Regasification and Storage Unit (FSRU) and construction of a new ~6.5km pipeline to take the gas from the facility to the existing gas transmission system.
The company has provided assurances it will undertake a range of assessments and investigations to assess potential environmental impacts of the project. At the moment, it’s is at pre-FEED stage – which is a process to assess technical and economic feasibility – and this is expected to be completed towards the end of 2020.
Other potential projects for the site include hydrogen and alternative fuels production, and the development of strategic oil storage facility to support Australia’s fuel supply security.
A Solar Power Assisted Refinery
Oil refining is an energy intensive process and Viva’s operations as they currently stand (or at least, stood) make it one the top 10 electricity consumers in Victoria.
There’s a significant chunk of currently unused land immediately north of the refinery owned by the company that makes up around 17% of overall land area at the site. Viva says it is appropriately zoned for a solar energy facility + battery storage and isn’t subject to flooding.
“From the 41 hectares of refinery land available, a solar farm of this size could generate around 25MW of clean energy1 from solar photovoltaic (PV) panels, equivalent to around 20% of our electricity needs.” states Viva.
Viva Energy already has a Power Purchasing Agreement (PPA) with Acciona’s wind farm near Colac, which supplies equivalent to around a third of the refinery’s electricity consumption. Between the two, around half of its electricity requirements could be covered by renewables – but then there’s the added bells and buzzers such as the LNG import terminal.
The company says it is currently conducting a study to understand the scope, scale and cost of the potential solar power station project.
In other somewhat related news, BP said yesterday it sees the COVID-19 pandemic as potentially having an enduring impact on the global economy, resulting in weaker demand for energy for a sustained period.
“bp’s management also has a growing expectation that the aftermath of the pandemic will accelerate the pace of transition to a lower carbon economy and energy system, as countries seek to ‘build back better’ so that their economies will be more resilient in the future.”
Back in February, BP announced its ambition to become a “net zero company” by 2050 or sooner. Shell followed with a net zero commitment (of sorts) in April.
Maybe Viva should make space for a few more solar panels.
Footnotes
- Viva probably meant “power”. Learn about the difference between power and energy here. ↩
About Michael Bloch
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Michael Bloch,
You state:
“In other somewhat related news, BP said yesterday it sees the COVID-19 pandemic as potentially having an enduring impact on the global economy, resulting in weaker demand for energy for a sustained period.”
I’d suggest the language used is downplaying how drastic the energy security situation is evolving into.
A piece posted at oilprice.com on Jun 12 by Julianne Geiger headlined “U.S. Oil Rigs Dip Below 200 For First Time Since 2005”, reported:
• Oil and gas field services company Baker Hughes reported on Friday, June 12, that the number of active US oil and gas rigs fell by 5 from the previous week, to 279, or 690 (or 71.2%) fewer rigs compared with this time last year.
• US active oil rigs decreased for the week by 7, bringing the total down to 199, compared with 788 active rigs this time last year.
• US active gas rigs increased by 2 for the week to 78, compared with 181 active rigs this time last year.
• Canada’s overall rig count held at 21 active rigs for the week, down from 86 this time last year.
See: https://oilprice.com/Energy/Crude-Oil/US-Oil-Rigs-Dip-Below-200-For-First-Time-Since-2005.html
“US shale gas and tight oil from low permeability reservoirs have provided a resurgence for US oil and gas production. Tight oil has allowed US oil production to double from its 2005 lows, and shale gas has similarly allowed a major increase in US gas production. However, the nature of these reservoirs is that they decline rapidly, such that production from individual wells falls 70-90% in the first three years, and field declines without new drilling typically range 20-40% per year. Continual investment in new drilling is therefore required to avoid steep production declines.”
See: “Shale Reality Check: Drilling Into the U.S. Government’s Rosy Projections for Shale Gas & Tight Oil Production Through 2050”, by J. David Hughes, published Feb 2018, https://shalebubble.org/
A twitter post on Jun 9 by petroleum geologist Art Berman, highlighting that 500 operating tight oil rigs are required to maintain 6 million barrels per day (mmb/d) tight oil production (and 11 mmb/d total US output). The included chart in the tweet looks at the possibility that US tight oil production could substantially fall from 7.17 mmb/d in Mar 2020 to 4.395 mmb/d (and 8.17 mmb/d total US output) in Jun 2021.
“Global natural gas consumption to drop 4% in 2020, or 150bn cubic metres (5.3 tcf)…twice as severe as that registered after the global financial crisis in 2009, when demand fell 2%.” –IEA
See: https://twitter.com/aeberman12/status/1270662191419723776
Global E&P investments expect to fall around -30% this year.
Shale/tight oil down -52%, oil sands down -44%.
See: https://twitter.com/aeberman12/status/1271072177182461955
“A significant increase in rig activity isn’t expected until 2022…For many companies, a reduction in capex won’t be enough to survive the low oil price environment.”
See: https://twitter.com/aeberman12/status/1271782060940722176
The recovery in US oil demand has faltered: “Deliveries of all fuels from storage depots remain 20% below year-earlier levels…Gasoline demand…has ground to a halt…The drop in distillate fuel oil demand is getting bigger, not smaller.”
See: https://twitter.com/aeberman12/status/1272134938058424321
“While oil prices begin showing signs of recovering from historic lows, traders and analysts say the worst may be yet to come for the gas industry as demand collapses in key Asian markets and storage facilities approach capacity. Unlike the world’s major oil producers, many liquefied natural gas (LNG) exporters are yet to curtail output, meaning the fallout could be longer and more severe than oil’s crash.”
See: https://www.smh.com.au/business/the-economy/australia-s-lng-tankers-sitting-idle-as-global-supply-glut-covid-start-to-bite-20200615-p552oh.html
I’d suggest that the longer global oil and gas demand remains suppressed (with oil prices below US$50 per barrel) the more likely that US shale oil and gas production will never return to 2019 levels.
Per “BP Statistical Review of World Energy 2019”, in 2018, USA was the world’s largest oil producer at 16.2% global share, yet had an estimated Reserves-to-Production (R/P) of only 11.0 years; and also was the world’s largest gas producer at 21.5% global share, yet had an estimated R/P of only 14.3 years. By comparison, Australia was a relatively insignificant oil producer at 0.4% global share; and was the world’s seventh largest gas producer at 3.4% global share, with an estimated R/P of only 18.4 years.
The COVID-19 crisis has temporarily created a global oil and gas glut due to substantial demand destruction, but it seems to me this will likely be short-lived, to be followed by increasing global supply scarcity later this decade. We need to rapidly reduce oil and gas dependency – we must leave oil/gas before oil/gas leave us.
UPDATE
A few hours ago BP released the 69th annual edition of the BP Statistical Review of World Energy, which collected and analysed global energy data for 2019.
See: https://www.bp.com/en/global/corporate/news-and-insights/press-releases/bp-statistical-review-of-world-energy-2020-published.html
BP CEO Bernard Looney stated in the into to BPSRoWE-2020:
“The technologies required to reach net zero exist today – the challenge is to use them at pace and scale, and I remain optimistic that we can make this happen.”
Interesting to see whether BP will walk the walk, and not just talk the talk. But it seems to be a different message from that of Viva’s reported focus on the development of an LNG supply and storage facility for their Geelong facility.
Per “BP Statistical Review of World Energy 2020”, in 2019, USA was the world’s largest oil producer at 17.9% global share, yet had an estimated Reserves-to-Production (R/P) of only 11.1 years; and also was the world’s largest gas producer at 23.1% global share, yet had an estimated R/P of only 14.0 years. By comparison, Australia was a relatively insignificant oil producer at 0.5% global share; and was the world’s seventh largest gas producer at 3.8% global share, with an estimated R/P of only 15.6 years.
I suspect the numbers will be radically different next year.
UPDATE
Oil and gas field services company Baker Hughes reported on Friday, June 19, that the number of active US oil and gas rigs fell by 13 from the previous week, to 266, or 701 (or 72.5%) fewer rigs compared with this time last year.
US oil rigs fell 10 to 189 this week, while US gas rigs dropped by three to 75, their lowest on record according to data going back to 1987.
In Canada, the oil and gas rig count fell four to an all-time low of 17 this week; 102 rigs, or 86%, below this time last year.
See: https://www.reuters.com/article/us-usa-rigs-baker-hughes/us-and-canadian-oil-gas-rig-count-falls-to-record-lows-baker-hughes-idUSKBN23Q2WU
On Jun 18, petroleum geologist Art Berman posted on his blog a piece headlined “U.S. Energy Dominance is Over”, where he included:
“Based on rig count analysis, U.S. oil production will probably be about 8 mmb/d by mid-2021 or more than 4 mmb/d less than peak November 2019 levels.” …
“But a new phase of economic reality and oil pricing is unfolding and no one knows where it will lead. Lower demand may mean that reduced U.S. oil output is appropriate. The only thing that seems certain is that the U.S. will not be the oil super power it was before 2020.”
See: https://www.artberman.com/2020/06/18/u-s-energy-dominance-is-over/
How much of an effect will the apparent rapidly changing landscape of global petroleum supply and demand have on Viva Energy’s plans for their Geelong facility?