Germany's Heide Raffinerie sees biofuel demand returning to pre-pandemic levels in Q4

Germany's Heide Raffinerie sees biofuel demand coming close to pre-pandemic levels in the fourth quarter and being followed by a strong 2021, according to CEO Juergen Wollschlaeger, who added that the company is developing a hydrogen project as part of the energy transition.

Heide, a middle distillates refinery north of Hamburg, with an annual crude refining capacity of 4.5 million mt, focuses on aviation fuel production, but also manufactures around 450,000 mt/year of petrochemical products, including olefins and aromatics.

The refinery continues to blend ethanol into gasoline as its biofuel obligation remains in place.

With the market moving slowly out of recession in the second half of next year, Q4 2020 gasoline demand in the region is set to be very similar to Q4 2019, with diesel a little behind the year-ago comparison, Wollschlaeger said. However, it remains unclear whether margins will pick up in Q1 or Q2 2021, even though Q2 prices are showing an improvement against Q1 in futures curves, he added.

"Jet is only product we see a sharp drop of demand," Wollschlaeger said.

On a new draft put forward by Germany's ministry of environment which would see a drop in cap on crop-based biofuels to 2.7% by 2026, and CHG savings of 7.25% by 2026 up from 6% in 2020 as well as the removal of first generation biofuels from the market by 2025, Wollschlaeger said, the blending rate increase was rather moderate. However the introduction of a multiplier GHGs for electricity and hydrogen would not have the needed effect "or drives things in the right direction" given the other forms of fuel generation that would be still existing at that point, he said. "The phasing out of biofuels quota is quite aggressive," he added.

While he agrees in principle with the phasing out of first generation biofuels, he thinks it should be phased out over more time, and let the market decide which is the favorable product as second and third generation biofuels are extremely difficult to implement given current legislation in Germany.

Wollschlaeger said that, as a small and independent company, Heide Raffinerie was well placed for the energy transition.

Heide oil refinery along with their partners Ørsted and EDF would build a 30 megawatts electrolysis plant, calling it hydrogen ecosystem, replacing grey hydrogen with green via electrolysis unit, powered by an offshore wind farm.

The size flexibility as well as proximity to renewable energy sources and using green hydrogen for the hydrotreat naphtha and mid distillates benefited the plant to get ahead in sustainability criteria.

"Energy transition is not going to be an overnight change, it needs time," Wollschlaeger said.

"Biofuels will play a role though in the energy transition," he added.

The refinery is looking to cut its carbon dioxide footprint for industrial operations, using green hydrogen for refined products desulfurization.

Heide Raffinerie plans to utilize green hydrogen towards methanol in the production of sustainable aviation fuel, rather than bio-components and the Fischer–Tropsch method.

The company plans to commission a pilot plant unit at the refinery in 2021, before moving to scale up the project in the next three to six years.