Paradise, Part 4 - Shift to Renewable Diesel Drives Many Refiners' ESG Plans

Each sector of the oil and gas industry — upstream, midstream, and downstream — faces its own unique set of challenges in dealing with the ongoing transition to a lower-carbon global economy and in addressing the increasing ESG-related demands of investors and lenders. Refiners are no exception. Their highly complex facilities may be capable of converting crude oil into gasoline, diesel, and jet fuel, but the fact remains these refined products generate greenhouse gases when they are produced and consumed. What can refiners do to prepare for an era of low- or no-carbon fuels and improve their enviro-cred at the same time? Many have been investing heavily in renewable fuels production, such as renewable diesel and ethanol, and in sourcing at least some of their electricity needs from wind and solar. Today, we continue our series on the environmental-social-governance movement in the oil and gas industry with a look at what refiners are doing on the ESG front.

This is the fourth episode of our exploration of energy-industry ESG, a topic we’ve been investigating for some time — partly in response to the many inquiries we’ve been receiving from clients and subscribers. In Part 1, we said that while the industry has been rebounding from a mostly dismal 2020, many investors and lenders have become hesitant — even averse — to putting their money in oil and gas. It’s not just the energy industry’s historic volatility that’s been giving them pause, it’s the unique social, political and financial pressures that hydrocarbon producers, oilfield service companies, midstreamers, and refiners face in demonstrating that they are addressing ESG issues.

In Part 2, we discussed the fact that environment issues take center stage when investors and lenders consider the ESG-related performance of energy companies. By far, the leading environmental issue facing the industry today is greenhouse gas (GHG) emissions, which are generated at pretty much every step in the production, processing, delivery, refining, and (especially) consumption of fossil fuels. We noted that, to help in the measuring and tallying, many of the powers that be in the ESG world divide a company’s GHG emissions into three buckets:

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