MOL accelerates transition towards a sustainable future
The MOL transformation story began in 2016 when it was one of the first within the oil and gas sector to admit that there were gloomy days ahead and that it was essential to begin the transformation. To plot out the path to a low-carbon future, the company published MOL Group 2030+. Five years after the launch of that transformation plan, the Hungarian energy company has revised its goals with an updated strategy.
"Five years ago, we recognized that the role of oil and gas companies was going to change significantly," Gabriel Szabó, Group Downstream Executive Vice President, MOL, says. "That is the rationale behind the energy transformation that most oil and gas companies are going through. The critical aspect of this transformation is timing. There is a clear business case behind all the new business models we are targeting, but they are heavily dependent on technology and innovation. However, in many instances, these technologies are still not proven at production volumes."
The revised strategy offers an unchanged vision of the structural, long-term decline in fossil motor fuel demand in Europe. Facing these market dynamics, MOL will continue and accelerate its fuel-to-chemicals transformation in its downstream operations to grow to become a leading sustainable chemicals company in Central and Eastern Europe (CEE).
This revised strategy has been shaped by two strong learning points from last year: the reduced demand for fossil fuels caused by the global pandemic, and the increased desire from all stakeholders for sustainability. "The lessening demand came as no great surprise, as we projected this in 2016 in our original strategy. However, that was only on spreadsheets and graphs. Last year, we faced reality much sooner than we expected, with a 20% fall in demand for our products. When it comes to sustainability, the swing towards a carbon-free Europe is going to accelerate. If I am asked the difference between our original strategy and the latest one, I would answer that the original strategy is still valid but has been accelerated. We have added a sense of urgency to our transition that we think is needed,” Szabó says.
The top-level changes for downstream operations. MOL's vision is that by 2050 it will be an efficient, sustainable chemical-focused company also powering mobility. This strategy has three distinct strands: improved operational efficiency, managing the fuel transformation and a value chain extension.
"The cost-competitive advantage will play a vital role in future businesses and new sustainable businesses," Szabó adds. "This is an integral part of our baseline operations, and the cost is something that we control today while we plan for the future landscape of the oil and gas business. In the meantime, we must keep our competitive cost advantage.
"The second pillar is the fuel transformation itself. Once we are over the pandemic effects, we still believe that there will be growth in demand for fossil fuels for—there will be a sharp decline after that. With that in mind, we plan to convert around 2 MM metric t (tonnes) of fossil fuel to other chemicals, such as monomers and propylene, and we would like to go further in the polymer value chain.
"Finally, there is the value chain extension, where we will look at how we extend our current value chain in compounding and recycling. Within that, we are open to inorganic growth, as well. For the whole story, we are planning to spend $4.5 B until 2030, and we are also relying on the funds from the recovery and resiliency budget from the EU."
Circular economy and its relevance to the energy sector. MOL will increasingly integrate circular technologies into its core businesses, using bio- and waste-based streams in production, scaling up recycling and utilizing CCS opportunities with a clear focus on materially reducing the segment's CO2 footprint.
One of the successful circular projects that MOL has been operating for almost a decade is tire recycling. Back in 2012, MOL opened and successfully operated a pilot plant for rubber bitumen with an annual capacity of 5,000 metric t at the Zala Site. In response to increased demand, MOL began building a new plant in the spring of 2019 in Zalaegerszeg, Hungary, that was completed last October. Each year, the recycling of 500,000 used tires—around 3,000 metric t of rubber scrap, or 8%–10% of the annual domestic tire waste—is used to produce rubber bitumen. The new plant can produce about 96 metric tpd of rubber bitumen.
Another long-running initiative is turning used cooking oil into biofuels. Since the project began in 2011, MOL has collected 1,900 metric t of used cooking oil and recycled it to produce biofuel. "This is a very innovative approach using cooking oil or even animal fat to get high-quality gas at the end of the transformation process," Szabó continues.
When it comes to plastics, MOL has a sister company in Germany called Aurora Kunststoffe, based in Neuenstein. The company has focused on producing so-called recompounds, recycled plastic granulates, which are of the same quality as virgin material. The production of plastic parts results in about 5% rejects. Aurora purchases these industrial production residues and uses them to produce a new, high-quality raw material in an environmentally friendly and resource-conserving manner. The goods can either be returned to the supplier via a contract service or sold to another customer in the plastics processing industry.
One of the biggest challenges is the plague of single-use plastics or polymers. For the packaging material, at present, only around 10% of the polymers used are recycled. There are three methods for recycling plastic: mechanical, chemical and solvents.
"With mechanical recycling, the plastic is ground, but the result is not virgin polymers; it is a B or C grade material that cannot be used for food packaging," Szabó says. "Then you have chemical recycling, where you try to crack the polymers' molecules with a lot of energy, and then you put it to the new value streams. The challenge here is the amount of energy required. The third option is solvent-based, and that is the route we have taken. We have partnered with APK of Germany, which has developed an innovative recycling technology named Newcycling that can be applied to a wide variety of mixed plastic types and process them into high-quality recyclates. The first Newcycling plant using APK's core technology is now being set up at APK's headquarter in Merseburg. The technology is a solvent-based process that enables the selective separation of polymers in mixed plastic waste. The result is pure granulates that have virgin-like properties. In this way, we give packaging a second life in its original application.”
The growing importance of carbon capture and storage? Carbon capture and storage may not be a new technology or concept, but it has been the subject of renewed global interest and attention in recent years and is something that MOL has experience in from its upstream operations.
"We have empty gas and oil reservoirs in our core countries of Hungary and Croatia, and we are quite experienced with utilizing CO2 for enhanced oil recovery in our projects," Szabó explains. "We know how to tackle and treat CO2. In our refining applications, there is a significant amount of CO2 emitted. We are capturing these molecules, and we want to transport those to the reservoirs to pump through them. The annual Scope 1 or Scope 2 footprints of the MOL Group are around 5.6 MM metric t of CO2, and there are empty reservoirs with 400 MM metric t of CO2 capacity. This gives us two decades for storing the CO2 emissions we are currently producing with our assets.
"In Scope 1 emissions, we have pledged to decrease CO2 emissions by 20% by 2030. This may seem like a modest ambition when you see the oil majors in the media committing themselves to be net-zero in a rather relatively short time. But there is still no technology behind those promises. What we have is absolute confidence and the transparency that 20% is feasible by 2030. We can achieve this through utilizing carbon capture and storage and improving our energy consumption. The less you consume, the cheaper it is, and the fewer emissions you produce, the fewer hydrocarbons you burn.”
Szabó concludes, “This has the dual benefit of making you cost-efficient, your production gets more affordable, and your emissions footprint is lower. Scope 3 is a difficult topic but considering that we are about to convert 2 MM metric t of fossil fuel, it will dramatically reduce the Scope 3 admissions. It will reduce the total emissions of the MOL Group by roughly 20%. With that transformation, we are not just getting ready for the future, and we also aim to be more sustainable."
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