José de Sá: How Refiners Can Navigate the Challenges of the Energy Transition

As the global transition to a lower-carbon economy accelerates, refiners face mounting challenges. José de Sá, a partner with Bain's Oil & Gas practice, explains how scenario planning can help refiners remain competitive in an uncertain future.

Read the transcript below.

JOSE DE SA: Two years ago, in spite of healthy refining margins, we saw mounting challenges for refineries. There was volatility in the oil supply; the global pool of crude getting heavier and sourer; mounting environmental restrictions; and a buildup of large, complex refineries in Asia and the Middle East.

Today, refineries continue to grapple with these challenges. And another prominent one has intensified as a critical issue—the global energy transition and the migration to a low-carbon economy.

The major complication behind the energy transition is its uncertainty and depth, requiring companies to be a lot more sophisticated in the use of scenarios. And why is that? For refineries, for instance, when we look at the scenarios our energy team has put together, there are at least two critical implications.

First, by 2030, global oil demand for transportation fuels could be 25% higher or 10% lower. Second, global oil demand for petrochemicals could grow by 25% or 30%. That is extremely important in terms of the typology of refineries that will be competitive 10 years from now.

Bottom line is that, on top of improving margins and sustaining commercial and operational excellence, refineries need to embrace scenarios as a tool to help them take appropriate action in the world of dynamic change—at the expense of damaging future competitiveness otherwise.