Decarbonization strategies for refineries

January 29, 2024 | Neil Kolwey, Industrial Program Director & Building Electrification Specialist

Petroleum refining is an energy-intensive industrial sector, which accounts for about 5% of total U.S. greenhouse gas (GHG) emissions. There are nine refineries in the southwest states of Colorado, Wyoming, Utah, and New Mexico (see table below), which account for about 22% of industrial emissions from the large emitters (those with more than 25,000 metric tons of carbon dioxide equivalent (CO2e) per year) in these states. Addressing the challenge of decarbonizing this important sector is key to achieving our climate goals for 2030 and beyond.

Table 1 – Refineries in Southwest states (CO, WY, UT, NM)

Many analysts agree that U.S. gasoline demand has already peaked and is likely to decrease in the coming years.¹ This is due to several factors, including the trend towards more electric vehicles and higher efficiency/lower vehicle emissions standards, as well as more people working from home one or more days per week. However, these changes will take time, and in order to achieve 2030 climate goals, we also need refineries to achieve significant reductions in their operational emissions and to begin producing lower-carbon products. 

As pointed out in RMI’s recent report “Oil Refining Emissions Cut Points,” refineries should take a holistic approach to reducing climate impacts from their operations and products. This should start with developing an overall business strategy, considering the evolving federal and state regulatory pressures and incentives, stakeholder sustainability pressures, demands for more sustainable fuels, and gradually declining demands for passenger vehicle fuels. 

Developing a progressive climate strategy should include corporate and facility-level goals (and associated metrics and reporting) for reducing GHG emissions from: a) refinery operations (Scopes 1 and 2), and b) indirect (Scope 3) emissions from the sale and off-site combustion of refinery products. Both of these goals will help improve the company’s and facility’s environmental performance and image. (Scope 1 emissions are direct, on-site emissions from combustion of fuels, leaks, or process emissions. Scope 2 emissions are indirect emissions from on-site consumption of purchased electricity. Scope 3 emissions include other types of indirect emissions from inputs to or products from the reporting facility.)

As shown in Table 2 below, of the major refining companies shown above, only Marathon and Chevron have established both of these types of GHG goals. Marathon has an intensity-goal for reducing refinery operational emissions and an absolute goal for Scope 3 emissions. Chevron combines Scopes 1, 2, and 3 emissions and has an overall intensity goal based on this total. HF Sinclair merely reports its annual Scope 1 and 2 emissions, with no reduction goal. Suncor does not have any separate goals or reporting for its emissions from refinery operations. (However, Suncor’s Colorado refinery does have a new requirement from the Colorado Department of Public Health and Environment to reduce its Scope 1 emissions by 14% by 2030.)

 Table 2 – Climate goals of major refining companies

A refinery’s holistic climate strategy should start with practical steps to reduce operational emissions, as well as steps to transition the refinery’s operations towards producing lower carbon products. RMI’s report points out several methods to accomplish these goals, including:

• Reduce flaring and fugitive emissions from methane and refrigerants, through improved operations and maintenance practices (could reduce Scope 1 GHG emissions by up to 5%).
• Reduce emissions from fuel consumption for process heating needs, through: a) lower temperature and more efficient design solutions (energy efficiency), and b) lower carbon fuels, e.g., eliminating on-site residue or coke combustion. (These steps could reduce Scope 1 GHG emissions by 5-15%.) Rather than using heavy product streams such as coke and residue as fuels, they can be sold as non-combusted products (e.g., for asphalt or battery anodes).
• Shift fluid catalytic cracker yields from gasoline to chemicals (e.g., propylene).
• Use fluid catalytic cracking waste gas to produce methanol (a much less carbon-intensive way to produce methanol).
• Shift diesel hydrotreating (DHT) yields toward sustainable aviation fuel (SAF) and renewable diesel.
• Explore converting on-site hydrogen production from steam-methane reformation to electrolysis (could reduce Scope 1 emissions by 10-15%).

Shifting refinery operations and input materials to produce sustainable aviation fuel is one example of the above strategies. Demand for SAF is increasing, especially from the more progressive airlines, and it can be more profitable for refineries to produce than gasoline (which will be in declining demand). However, depending on how DHT yields and other operations are shifted (as well as the type of SAF feedstock), SAF production will increase Scope 1 GHG emissions in many cases, while reducing Scope 3 emissions from product sales and combustion. There are several refineries in western states (e.g., Washington, California, and Montana) that are beginning to produce SAF. The U.S. Department of Energy (DOE) is offering tax credits and grants to refineries to help support SAF production through the Inflation Reduction Act.

In addition to shifting refinery operations and producing lower-carbon products, refineries should also consider reducing their Scope 3 emissions from their input fuels and feedstocks, such as through purchasing oil and gas produced with low methane leakage. To aid in doing this, RMI has developed a tool for comparing emissions of oil and gas resources. Methane emissions from the production of oil and gas can vary by as much as a factor of five, so choosing fuel resources with lower upstream emissions can have a large impact.

To support refineries in developing and implementing these strategies, we urge states to require refineries (and other large industrial GHG emitters) to develop and submit five-year GHG emission reduction goals and plans to achieve these goals, for Scope 1 and 2 emissions at a minimum, and to report progress towards these goals annually. In addition, states can encourage refineries to apply for DOE grants to implement new decarbonization technologies such as SAF and clean hydrogen production. Some states such as Colorado offer industrial decarbonization grants to complement federal grants.

The more progressive refinery companies are beginning to adopt these sustainable business strategies and practices. We encourage states and other stakeholders to support and push other refineries to pursue these types of strategies as well, as they are essential to achieving state and national climate goals. 

1.  “Bumpy Road Ahead for U.S. Gasoline Demand and Energy Transition,” Reuters, July 2023, https://www.reuters.com/business/energy/bumpy-road-ahead-us-gasoline-demand-energy-transition-2023-07-24/. ︎

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