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CERAWEEK: Jet fuel lagging global petroleum demand recovery

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Business travel to lag leisure: United

Airlines use multi-pronged net-zero approach

Houston — As the impact of the coronavirus pandemic ebbs with the rollout of vaccines, global petroleum demand should return to 2019 levels by the end of this year, although jet fuel demand will lag that recovery, industry executives said March 1.

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So far in 2021, demand for liquid petroleum volumes are down by about 9% from 2019 but expectations are for demand to be "restored more or less back to normal by the second half of this year," said Shell CEO Ben van Beurden, speaking at a CERAWeek by IHS Markit panel.

This is due in part to strong Asian demand and growing demand for gasoline and diesel.

"The biggest gap is jet," he added,

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While global demand for refined products is expected to grow by 5.9 million b/d in 2021 and 3.2 million b/d in 2022, jet fuel demand is not expected to return to 2019 levels until 2023, according to S&P Global Platts Analytics forecasts.

The budding recovery in jet fuel seen in late 2020 from May's nadir has been squashed by tighter travel restrictions to prevent transmission of new strains of the coronavirus. This has reduced air travel, with Platts Analytics expecting 2021 jet demand to average just over 6 million b/d, or 23% below 2019's average.

"We've taken to joking we were the first out and the last in," said panelist Scott Kirby, United Airlines' CEO, about the sluggish return of airline travel.

Kirby said revenues were down by 65%, but with the vaccination rollouts the "open question" is will there be a recovery in leisure air travel by the summer or the fall of 2021? He expects that demand for leisure flying will be "well into recovery by 2022."

"There's a lot of pent-up demand," he said, adding that he expects the business travel recovery to take a bit longer.

This is partly because companies will continue to encourage virtual meetings as a way to keep expenses low. But that won't last forever, he added.

"We are social animals. You can't build relationships...where you get to know people and make a relationship," he said.

"The first time they [a company] lose a sale on Zoom, they go back to in-person," he said, adding that mandatory vaccines would go a long way to making flyers feel safer.

The net-zero challenge

Both van Beurden and Kirby agreed the desire for net-zero carbon emissions will be a major driving force for company growth strategies going forward.

"Net-zero carbon emissions is what society wants," van Beurden said. "And it's the right thing to do. Especially if you want to be a significant and forceful player. You have to go where society wants to go."

Shell, Europe's largest oil and gas company, has stated previously it plans to be a net-zero emissions energy business by 2050, providing baselines which showed oil production peaked in 2019 and total carbon emissions peaked in 2018 at 1.7 gigatons.

"It's a defining issue. It's this generation's moonshot," said Kirby.

Kirby said United's net-zero plan was many pronged, including a combination of sustainable aviation fuel, some form of mitigation, and carbon capture.

"But it's not a 100% solution," he added, noting that airlines as a group need to support initiatives to get to net-zero emissions.