Group Strategy & Development Future Fuels: The Implications of a Decarbonised Energy System Brian Worrall September 26 h , 2019
Agenda ▪ About DCC ▪ The Global Energy Challenge ▪ Decarbonised Liquid Fuels ▪ Implications for Government ▪ Implications for Industry ▪ Next Steps 2
About DCC • Dublin based • Founded in 1979 • Strong growth: organic and M&A • FTSE top 60 company • Energy and other sectors balancing sector knowledge and diversity • Operated under a number of well known brands: • Gulf in retail • Certas Energy in fuel distribution and European retail • Partners with global brands in energy, technology and healthcare • Significant infrastructure assets in Oil and LPG
Our business today DCC is a leading international sales, marketing and support services group operating across four divisions Revenue Operating profit £15.2bn £460.5m Locations Market cap Employees 17 £6.5bn 12,500+ ROCE Net debt/EBITDA 17.0% 0.1x countries across 3 continents Profit by division Profit by geography 10% 4% 13% DCC LPG Continental Europe 14% 45% UK 44% DCC Retail & Oil RoW DCC Technology 41% Ireland DCC Healthcare 29% 4 4
Why diversity works for DCC Significant operating profit growth across all divisions since 2008 Operating profit FY08 – FY19 (£’m) CAGR: 15.2% ROCE ‘19 500.0 ‘08 – ‘19 CAGR 450.0 +12.5% 16.6% DCC Healthcare 400.0 +7.9% 14.3% DCC Technology 350.0 300.0 +14.2% 18.6% DCC Retail & Oil 250.0 200.0 150.0 +22.7% 17.1% DCC LPG 100.0 50.0 0.0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Facilitates Growing our Organic and Optionality in Maintaining returns geographic opportunity set in expansion across acquisitive growth capital allocation discipline attractive markets the Group 5
The Global Energy Challenge
Global challenges… Our Energy system is facing challenges… Energy Changing Continued Growth in Customer Global system in Oil & Gas oil price resource population choice demand volatility transition access Global Energy New sources From 7 to 9 billion demand to double World needs more New energy carriers OPEC, shales, New value creation by 2050 with 75% between 2000 & energy; less CO2 New business shorter price cycles models living in cities 2050 models 7
Government challenges… Industrial Clean Air Strategy Strategy Improving Cleaner, smarter Domestic Low Carbon Business and Renewables Public Sector and more Heating transport Industry flexible power Ultra Low Government NRMM & Red Ultra low Emission bus Low Carbon Tech Leadership Diesel emission zones scheme Secure clean Reduce emissions Reduce emissions Reduce emissions Reduce emission Protect the Protect the growth and from transport at home in farming from industry environment nations health driving innovation 8
The Climate Change Agenda Paris Agreement ❖ UK 2050 Net Zero Commitment ❖ UK and Ireland ban on fossil fuel boilers ❖ in new homes from 2025 France ambition to phase out heating oil ❖ by 2027 UK to start with off-grid - phase out high ❖ carbon fuels during 2020s Norway ban on the sale of new petrol and ❖ diesel cars by 2025
Desire and Reality: this will take a while The EU’s own forecasts show a high penetration of fossil fuel in 2050……….
The size and scale of the energy transition is huge 11
Governmental approach BANS DIESEL / PETROL IN DIFFERENT COUNTRIES & CITIES Phase out new Ban on new Ban on new Ban sale of Madrid petrol and diesel ICE vehicles. ICE vehicles, fossil-fuel- cars and vans by London only electric. powered 2032. vehicles Rome 2019 2020 2025 2030 2035 2040 All new cars Copenhagen and vans sold Ban all new All new vehicles should be Ban on new ICE emission-free petrol and zero-emission vehicles (no (virtually banning diesel cars & vehicles. legally binding) petrol and diesel) vans (Clean Air Plan) Ban on production Oxford Paris and sale of fossil fuel cars (date not yet decided) 12
Decarbonised Liquid Fuels
Many different decarbonised liquid technologies………….
On-Going Efforts to decarbonise Heating Oil in the UK • Cross industry working group on UK heating oil • Developing a pathway to decarbonisation • Involves all parts of the supply chain • Not easy, but is essential • Two stage development pathway likely: • Introduction of FAME to offset fossil • Replacement of fossil with bio liquid • Initial evidence suggest this to be a very viable alternative
The energy mix Energy future Renewables • PTL * Gas • BTL * • HVO * • GTL * Performance Retrofit to • B100 E-mobility Hydrogen • LPG Fuels engines • Biomethane • LNG • Renewable • CNG technology • Biofuels • Algae Performance Diversification CO2 solutions OEM Fuels through Gas What role do all of these play in the future? What learnings can we take from other countries? * Paraffinic Fuels : GTL / PTL / BTL / HVO 16
Brian W to add gas references in addition Fuels now and for the future to liquid Biofuels GTL HVO • B5 - 100 • (Gas to Liquids) • Hydrotreated vegetable Oil Now and next 3 – 5 years BTL PTL GTL / HVO • Biomass to • Power to liquid blend Liquid HTL HBO Algae as a • Hydrothermal • Hydrotreated feedstock liquefaction biofuels Please note a lot of these technologies exist or are being developed and commercialised. (Happy to provide further examples of where there are various European projects) 17
The energy mix: Renewables ICE Renewable liquid fuel alternatives for ICE Comparison of alternative technologies to standard diesel Fuel Infrastructure Vehicle cost Fuel cost Air Quality CO2 savings cost implications impact • Paraffinic Fuels synthetically manufactured liquid fuels from B20 Low Low Cost neutral Negligible 10-15% feedstocks such as: B100 Low Low Cost neutral Unclear 84-95% • PTL Power to Liquid Paraffinic Fuels None None Cost premium Positive impact 36-91%* • GTL Gas to Liquid (GTL, HVO (*HVO) • BTL Biomass to Liquid currently) • HVO Hydro-treated Vegetable Oil CNG/LNG High High Cost savings Positive impact Similar • B20 / B100 Hydrogen High High Cost premium Positive impact 100% (if renewable) • Algae (advanced biofuels) Electric Medium Medium Cost savings Positive impact 30-50% • Biogas / Biomethane (produced from organic waste) PTL, HBO, HTL High None Unknown Positive impact 80 – 100% • (evolving renewable Renewable technology technologies) “e - fuels” 18
Fuel development road map - CNG (TEN-T ) - Hydrogen (optional) - LNG maritime ports & HDV (TEN-T) Now 2050 Further development GTL & CO2 s as Biofuels / HVO / GTL 2050: standards: 2020: 2030: technology blends & blends, Algae, transforms >80% GHG >20% GHG <15% for LDV >40% GHG Carbon offset BTL, PTL, <20% energy <27% energy programmes & HDV biofuel blends, efficiency efficiency HBO & HTL 2040: <20% <30% >60% GHG renewable renewable HVO / GTL energy energy blends & potential small quantities of Algae based HVO / GTL distillates. blends, Algae, Biofuel BTL HTL, and PTL blends to start to become available. Biofuel blends CO2 LNG at inland E-mobility Deadline for Member standards: ports (TEN-T) CNG States targets on <30% for LDV (urban areas) alternative fuels & HDV infrastructure 19
It’s Not Just Liquid Fuels………………… Primary Process Feedstocks Secondary Process TRL Products Vegetable oils Animal fat/tallow 9 HVO Used cooking oil 6 Direct synthesis BIO Gasification Fischer-Tropsch 5 Methanol-to-gasoline 6 Hydrothermal Lignocellulosic (MTG) synthesis liquefaction biomass 5 Hydrotreating Flash pyrolysis 6 Dehydration Hydrotreating Glycerol-to-methanol 7 MTG synthesis Glycerol synthesis BioDME Catalytic deoxygenation 6 Sugar/starch Bio- Aqueous phase 4 isobutene Hydrotreating reforming Waste Bio- 3 Biosynthesis isobutylene 20 Vector images sourced from www.vecteezy.com
Implications for Government
Governments can play their part…… • Create a level playing field • Encourage all new technologies • Use life cycle analysis • Understand the requirement is to move from fossil to renewable not necessarily from the molecule to the electron • Recognise that ALL technologies are likely to ne needed given the scale of the challenge • Legislate with careful wording, cleaner liquid fuels, re-purposing the existing infrastructure maybe a good alternative • Let the market decide the take up of technologies through ease of use, price etc. • Do not make the mistake of legislating for solutions specifically
Implications for Industry
Trade Associations can play their part…… • Trade associations have a unique perspective • EU institutions prefer associations to company dialogue • Represent the industry through the transition • Lobby Government • Lobby Regulators • Inform members • Challenge members • Trade association alliances: • Different geography • Like minded ‘transition’ partner associations • Helping things happen: • Sound science • Level playing field • Trials
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