A global drive towards electrification of road transport to reduce carbon emissions may cut demand for the world's oil refining capacity by half in 2050.
"Going forward we will be touching by 2050 somewhere very close to 90% of electrification," Mukesh Sahdev, senior vice president and head of downstream at Rystad Energy said, adding that this scenario would probably lead to a 50% decline in global refining capacity.
Electric vehicles will cut global consumption of gasoline and diesel, but demand for other refined oil products in aviation, maritime and petrochemical sectors could remain high because of urbanisation which will pose a challenge to the refining sector, Mukesh said.
This is going to lead to a significant rationalisation of the downstream assets across the entire supply chain. For example, cokers, upgrading units used to produce gasoline and diesel, would have to tweak their production to produce more petcoke for graphite in batteries, he said, adding that processing crude directly to petrochemicals is another trend.
Still, global oil demand could rise in the short term. The experts expect pent-up oil demand from the COVID-19 pandemic to drive up global crude processing to 80.1 million barrels per day in the second half of 2021 as refiners maximise gasoline output.