Scaling for Success – Innovation Driving Growth & Impact

Driving growth and securing future competitiveness are two of the main challenges facing the oil and gas downstream industry. While the sector has a long-standing relationship with technology, the focus has largely been on purchasing licensed technologies rather than developing them in-house through research and development (R&D). This approach is beginning to shift as companies are engaging in a wide range of R&D projects to tackle new environmental challenges, namely CO2 emissions and plastic pollution. The industry is eyeing developments in plastic recycling, green hydrogen, and renewables as avenues for innovation. To delve into how companies can increase innovation and ensure success as it does so, we invited Bilal Guliyev, General Manager of R&D and Innovation, SOCAR Türkiye, Ay?a Ar?nan, Strategy & Business Development Manager, Tüpra?, Miroslav Mrzula, Head of SN R&D Slovnaft, Fabio Montanari, R&D Business Partner Energy Evolution, Eni and Walter Pfeiffer, Partner, Oil & Gas, Energy, Bio and E-fuels, Roland Berger Strategy Consultants to the stage at IDW - Downstream Conference in Istanbul, last September.??

The Rising Importance of R&D?

SOCAR's experience serves as a prime example of how integral R&D has become in the sector. The vertically integrated oil and gas company has leveraged R&D to create innovations in products, processes, and services, resulting in increased productivity, operational excellence, and customer satisfaction. Partnerships with governments and educational institutions have further enriched their R&D landscape, validating the notion that modern challenges require more sophisticated solutions built on expert knowledge and collaborative efforts.?

R&D demands a different kind of agility. Companies are increasingly establishing separate units to foster innovation, that work in close alignment with other business segments. Although R&D activities are inherently risky and capital-intensive, the need for skilled manpower and precise process management has never been greater. Solutions such as predictive maintenance for debottlenecking within production units are just one example of how R&D can serve immediate operational needs while also serving longer-term strategic goals.?

The transformation of traditional oil and gas refineries into biorefineries, specialising in the production of Hydrotreated Vegetable Oil (HVO) and Sustainable Aviation Fuel (SAF), serves as a compelling case study of how technological innovation can revolutionise asset management in the downstream industry. As the energy sector remains under pressure with the transition towards sustainable alternatives, a shift in research and development has become essential. ENI, for instance, has been a pioneer in this area, having initiated the research and development of biofuels from vegetable oils and fats over a decade ago. This groundbreaking work signifies not just an incremental change, but a complete rethink of established technologies, adapting them to new contexts and challenges. Traditional processes such as hydrotreating and catalytic reforming are being re-engineered to accommodate a variety of feedstocks, thereby laying the groundwork for the liquid fuels of the future.?

In this rapidly evolving landscape, the search for suitable biofeedstocks was initially a challenge however, with extensive and ongoing research more than 400 different types of biofeedstocks have been identified, rigorously analysed, and evaluated based on their performance characteristics. This highlights not only the adaptive nature of the industry but also the continued commitment to R&D as we chart the course for a sustainable future.

The success of ecofining technologies further attests to the positive impact that converting traditional refineries into biorefineries can have.??

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Balancing Current Needs with Future Goals?

Despite the ongoing energy transition, fossil fuels remain a significant part of the energy mix and will likely continue to be so until 2030. As such there is a need to maintain current assets and enhance their efficiency through R&D. Simultaneously, investments in new technologies like biofuels, green hydrogen, and zero-carbon electricity are critical for those planning a net-zero future. The role of regulators also comes into focus, especially in providing the necessary infrastructure for green technologies like hydrogen to be effectively utilised.

Customer-Centric Approach and Collaborative Innovation?

A notable shift in customer preferences has been seen in recent years. Slovnaft has witnessed that the demand for greener products has become more important than the price. This trend highlights the need for agile and flexible processes that consider customer needs when developing business targets and accelerating innovation. Additionally, the challenges associated with retrofitting refineries for new types of fuels exemplifies the need for collaborative efforts in technological innovation. Working with various stakeholders, from universities to startups, offers a holistic approach to R&D that is better equipped to address the complexities of the energy transition.

Challenges, Risks, and the Road Ahead?

The path towards a more sustainable and efficient future comes with challenges, especially around technology adoption. For instance, carbon capture and utilisation present a myriad of issues that defy a one-size-fits-all solution. These challenges underline the need for an all-around approach to R&D, that is grounded in a strong vision and collaborative endeavours. Companies must be willing to invest in non-proven technologies and be prepared for the possibility of no immediate returns. Budget allocations for R&D activities, especially those related to the energy transition, have to be thoughtfully managed.?

The younger generation's interest in energy transition strategies adds a layer of social responsibility to corporate planning. Companies like Tüpras are already separating their core business KPIs from R&D initiatives, emphasising the importance of sustaining profitability to fund future innovations.??

?In summary, as the industry undergoes massive changes, the emphasis on becoming more sustainable through innovative products and broader portfolios becomes paramount. Investment in R&D and talent is not just an operational requirement but a strategic imperative for companies aiming to stay competitive in this rapidly evolving landscape.

Want to hear more??

This piece is part of a comprehensive report from the latest IDW - Downstream Conference, which took place in September 2023, in Istanbul, Türkiye.?

?? Visit europetro.com/idw and register your interest! Our team will send you the full report once available.

Why not join us next year and take part in the conversation?

23-25 September 2024, Warsaw, Poland ???? Secure your place today!