(Bloomberg) -- The Stanlow oil refinery in northern England is getting ready to sell more fuel when a rival plant in Scotland shutters next year.
The Stanlow facility near Liverpool plans to invest in infrastructure including terminals and is adding storage capacity to cut logistics costs, Deepak Maheshwari, head of the refinery, said in an interview. It wants to sell more fuel from Scotland to the north, down to London further south.
“We are trying to increase our footprint,” he said. “It is important for us to provide customers with a proposition to have a national contract rather than a regional contract.”
Europe’s oil refining industry is forecast to shrink in the coming years, partly as carbon taxes and high energy costs make it harder for to compete with rivals outside the region. Policymakers also favor a move toward electric vehicles, which was cited by BP Plc in its case to scale back operations at a major German refinery from next year.
Stanlow, which is also at the center of a decarbonization cluster known as Hynet, will be one of five oil-processing plants left in the UK once Grangemouth closes.
The Scottish plant is to be turned into an import terminal, meeting the same fate as London’s Coryton, which stopped processing in 2012.
Tony Fountain, managing partner of Essar Energy Transition, which runs the Stanlow site, joined calls for the refining industry to be included in an initiative known as the carbon border adjustment mechanism. CBAM, as it’s known, imposes a charge on imports of goods like steel from countries with weaker pollution standards.
“We have less scale and higher operating costs” than rivals outside Europe, Fountain said.
CBAM won’t include fuels like diesel, which come into the UK from the Middle East and India.
“If you want to have refineries in the country and you want the refineries to decarbonize and pay carbon taxes, it is absolutely essential,” Fountain said.
Hydrogen Plans
In a bid to cut emissions, a number of European refiners are looking at cleaning up the production of hydrogen, which is needed to make conventional fuels like diesel. It’s also needed in biofuels production and could be sold to industrial clients to replace natural gas in processes such as running a turbine.
Under plans first outlined in 2021, Stanlow is backing carbon capture and storage technology to make a cleaner form of the fuel dubbed blue hydrogen.
Hynet is among initiatives favored by the UK government, having been granted Track 1 status. The previous Conservative government last year committed as much as £20 billion ($25.9 billion) to the technology.
Essar Energy Transition expects the final investment decision on the first of two hydrogen plants on the site to be taken later this year, according to Fountain. The government has already agreed to support that production, with commercial terms in place for 15 years from the time output starts in around 2028 or 2029, he said.
Pilkington, a U.K. glassmaker and unit of Nippon Sheet Glass Co., and consumer products company Unilever will be future buyers of hydrogen from Stanlow under the Hynet initiative, Essar Energy Transition said previously.
Blue hydrogen is about three times cheaper than green hydrogen, a competing technology made from water and renewable power, according to Fountain.
“We think conventional oil products are going to be around for a long time,” he said. “We want to meet those needs for a long time.”
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