How electric vehicles can help shape the future of the oil and gas industry

The adoption of battery electric vehicles (BEVs), also known as EVs, is increasing across most western societies. But as their popularity grows, the infrastructure needed for charging them must also expand, prompting various industries to find new ways to meet rising demand.  

One option would be smart grids, which offer a solution by working with renewable energy sources and facilitating efficient EV charging, claims the recent GlobalData report on oil and gas sector strategies in electric vehicles.   

Oil and gas companies have had to adjust and diversify their investments and strategies in response to government and environmental pressures to reduce emissions. And one potential avenue for alternative investment is EV charging stations, which can complement their existing assets such as gas stations.   

But, argues GlobaData, not all major oil companies have chosen to expand into EV charging infrastructure, a decision that could have unfavourable consequences for their ongoing financial performance given an anticipated gradual decline in fuel demand from 2030 onward.  

The burgeoning growth of EVs presents a potential challenge for the oil and gas industry. Global EV sales are expected to hit 10 million by 2025, potentially reducing oil demand by 350,000 barrels per day. This surge in popularity could dramatically alter oil consumption patterns, with projections suggesting that by 2040, EVs could displace over 20 million barrels of oil daily.  

For investors in the oil and gas industry, comprehending the essential role of EVs is crucial to understanding the broader energy landscape. Any transition away from more traditional energy sources will likely be gradual, contingent on advancing new technologies and increasing the use and acceptance of renewable energy.  

However, according to Raj Shekhar, director of oil and gas at GlobalData, the increase in EV infrastructure may impact the current network of gas or fuel retail stations.   

Shekhar suggested that an alternative investment option could involve building more EV charging stations, as they complement existing assets. Many major oil companies are already preparing for EV adoption and have begun investing in, or expanding their presence with, EV charging stations.   

Shekhar said: “Companies are looking to roll out charge points through their existing retail outlets, which, in most cases, are operating at vantage locations in cities or busy highways that attract a sizable number of vehicles on a daily basis, including EV.”   

For instance, Shell began rolling out its first EV charging stations in 2017 and acquired a company called New Motion in the same year, which gave it immediate access to 30,000 stations across Europe. It also acquired Greenlots, a second company that provides EV charging solutions, in 2019.  

BP began branching out in EV charging technologies by working with the American charging technology company FreeWire. FreeWire has a Boost Charger system that can raise three-phase power to 120kW using an extra battery, providing a fast-charging service installed anywhere in a couple of hours. 

But, even if EVs decrease gasoline and oil demand, these hydrocarbons will still be essential. This is because various products obtained from crude oil processing, such as asphalt and lubricating oils, will continue to be needed in cars, trucks and vans – regardless of how popular EVs become.  

“However, with the regulatory push, EVs might see better adoption in mid-to-long-term future that would put a dent on these [transportation fuel] revenues, as gasoline and diesel demand are set to decline. Growth in natural gas consumption is still expected within power generation, which is the direct beneficiary in the EV market dynamics,” Shekhar added.  

According to GlobalData, oil and gas companies are diversifying into renewable energy technologies and low-carbon solutions due to increasing pressure to clarify their position in the net zero transition. But oil and gas will continue to play a crucial part in the manufacture of materials for electric vehicles and EV charging infrastructure. 

Lithium-ion batteries – essential components of electric cars – contain electrolytes made from petrochemicals. Additionally, the electrodes in lithium-ion batteries contain graphite and other materials derived from oil and gas. Petrochemicals are used to produce rubber for tyres, and petroleum-based oils are also used to cool and lubricate electric motors and powertrains.  

Ravindra Jayant Puranik, GlobalData's associate project manager for oil and gas research, said: “Plastics are commonly used to produce molded components in both the conventional vehicles running on internal combustion engines (ICE) and the EVs.” 

He continued: “These include polyethene, polypropylene, polycarbonate, PVC, and synthetic rubber (Styrene-butadiene Rubber) foams that are lightweight and offer considerable durability to withstand the vibrations that a vehicle would normally go through.”  

He added that some of these materials possess thermal and electrical insulation abilities, which can be beneficial as separators for cells in EV battery packs. Robust plastic is under assessment for its potential to serve as containers for EV batteries, possibly substituting aluminum or steel. Puranik believes this could decrease the overall battery weight and enhance EVs’ range.  

Not all major oil companies have decided to expand their operations into the EV charging space, and some have even stated that they have no plans to get involved.  

For instance, ExxonMobil does not plan to invest in EV charging stations, as it believes it would not provide a significant competitive advantage or unique capabilities. The GlobalData report states that ConocoPhillips has not released any comments on its position, nor shown or announced an interest in investing in EV charging technologies. 

Furthermore, in its environmental, social and governance (ESG) report published in August 2023, Valero, a fuel producer, revealed that it does not consider electrification the most effective or efficient solution for climate-friendly transportation. As a result, the company does not have plans to develop charging infrastructure for electric or plug-in hybrid vehicles.  

On the other hand, GlobalData’s Shekhar does predicts that countries that produce large amounts of gas, such as Qatar, are anticipated to perform well in the medium-to-long term. Market dynamics are projected to shift due to technological advancements, resulting in increased production and a less disruptive supply chain. As a result, there will be greater adoption of renewables and other cleaner sources, such as hydrogen.  

Hydrogen has gained traction in recent years as an alternative form of energy. It is light, storable, and does not produce direct carbon emissions or greenhouse gases when combusted. In fact, several major economies, such as the US and the EU, have laid out hydrogen roadmaps as the energy transition moves centre stage.  

Shekhar added: “The oil-producing countries need to rejig their business operations and see possibilities in natural gas. Though oil production may not decrease abruptly, an increase in natural gas production is imminent. This has led the prominent oil-producing countries, such as Saudi Arabia, to look for quality gas fields in the country, and elsewhere.”  

According to Puranik, recently “companies are adopting a mix of organic and inorganic growth strategies to expand their presence in the EV charging space. The profits they generate from their core operations will finance investments in clean technologies, including EV charging and battery technologies.”  

Although GlobalData says that most major oil companies have expressed their desire to expand their EV charging infrastructure, the data is varied. Shell and TotalEnergies are tied for the lead with more than 55,000 operational charging stations each globally, and have equally ambitious plans to grow their networks in the coming years.  

Following closely behind are BP and Eni, which have extensive coverage and have announced intentions to more than double their charging network. The numbers drop significantly for Repsol, Orlen, and Petronas, mainly because they have a smaller infrastructure to work with.  

In the UK, the government announced in 2023 that it was looking to deploy 300,000 public EV charging points by 2030. However, the ambitious goal is complicated by the practicalities of installation, with companies needing to install 110 chargers a day – compared to the current rate of 40 a day.  

The growing adoption of EVs is transforming the oil and gas sector, introducing obstacles and prospects for established companies. Companies are expanding their portfolios and allocating resources to renewable energy to adjust to this. The shift will unfold gradually and necessitate advancements in innovative technologies, underscoring the importance of a well-rounded energy provisioning strategy. 

But, the very concept of a circular economy does not naturally fit the oil and gas industry. Much of the industry’s output involves the production of fuel via fossil-based and non-renewable energy sources, which naturally incurs waste.  

However, the petrochemical sector produces usable materials, other than fuels, for a variety of applications, with plastics being the most widely used.  

According to GlobalData’s 2024 Global Plastics Market report, the global plastics market is expected to grow at a 2% CAGR between 2024 and 2030. It added that Asia continues to dominate global plastics consumption, primarily due to the growth of the packaging sector in countries such as China, India, South Korea and Japan. 

Establishing a circular economy would have a transformative impact on the oil and gas industry. Industry leaders such as BP, Shell, and TotalEnergies, have already set themselves targets within the circular plastic economy, using such approaches as mechanical recycling, chemical recycling, and bioplastic production.  

But oil and gas companies involved in recycling plastics are significantly impacted by the cost of recycling – cost of virgin plastics is significantly lower than the recycled material. Also, low oil and gas prices could further impact the companies pursuing plastic recycling, as diminishing prices cause the price of virgin plastic to fall further, making recycled plastic even more uncompetitive. 

Several major players already have major initiatives in place. A spokesperson for chemical producer BASF said the transition to a circular economy “is a complex process that requires collaboration and investment across the value chain.” 

“The establishment of a circular economy will open up new markets and opportunities” and in early 2024, BASF launched loopamid, a solution for more circularity in the textile industry.  

The petrochemical industry also needs a supportive regulatory and policy framework to incentivise a circular economy and ensure a level playing field, said BASF. 

BP aims to eliminate operational waste and pollution while enabling the usage of materials that offer circularity. It is working with Clean Planet Energy, a UK-based plastic waste recycling company, to help it pursue a circular plastics business plan. The partnership aims to process 20,000 tonnes a year of waste plastics into naphtha and ultra-low-sulphur diesel. 

Over in the US, Dow Chemical is committed to reducing plastic wastage and improve its recyclability. It has collaborated with bio-feedstock suppliers to derive bio-circular feedstocks from vegetable waste and other industry residues, to develop bioplastics.  

A spokesperson for Dow said transitioning to a circular economy “is critical to reducing plastic pollution” and the company is “committed to creating a fully circular plastics system worldwide, where every type of plastic waste can be recycled and recycled content is incorporated back into all products.”  

And ExxonMobil has developed its proprietary Exxtend technology for advanced recycling of plastic waste. The technology is employed at its recycling facility in Baytown, Texas, which began operations in December 2022. 

According to an ExxonMobil spokesman, the “world needs a broad set of solutions to address plastic waste, and advanced recycling is one of them. Our technology can transform plastic waste into raw materials that are used to make products people need”.  

He added that “advanced recycling is a new technology, so it will take time to expand and take hold. It will need all of us – industry, government, and our communities – to help create a circular economy for plastics”. 

And in July 2023, Saudi Aramco successfully demonstrated a chemical recycling process for plastics at its SATORP refinery, jointly owned by Aramco and TotalEnergies. The circular polymers derived from plastic waste have already received ISCC+ certification.