Saudi Aramco boosts digital fuel financing to extend combustion engine's lifespan
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Saudi Aramco, the world's largest oil company, is bulking up investments in synthetic fuels derived from renewable energy, betting that traditional combustion engines will remain a vital part of transportation, despite the growing shift towards electric vehicles.
In an interview, Ahmad Al-Khowaiter, a senior executive at Saudi Aramco, dismissed the global rush to electrify most road transport as impractical from a climate perspective, particularly for countries reliant on fossil fuels for electricity, such as China, which sources over half its power from coal.
"There's been too much hype about the speed at which electrification will take hold worldwide," Al-Khowaiter, Saudi Aramco's executive vice-president for technology and innovation, stated. "It certainly has its place in the market, but there will always be a need for other solutions like internal combustion engines."
Saudi Aramco's wager on internal combustion engines includes a 10% stake in Horse Powertrain, a joint venture with Geely and Renault to establish a new engine manufacturer, and a collaboration announced with Chinese automaker BYD, under which Saudi Aramco will share engine technology with BYD for use in hybrid vehicles.
Their ventures share a common goal: to lower emissions from present vehicle fleets and prolong the lifespan of internal combustion engines.
E-fuels, primarily produced from renewable electricity, carbon dioxide, and water, are viewed as a means to decarbonize transport and close the emissions gap between electric vehicles (EVs) and conventional engines.
Automakers like Stellantis and Toyota are experimenting with e-fuels to reduce emissions, although auto executives are hesitant to project when these fuels will become affordable for mass production.
Stellantis reported that its tests demonstrated that engines launched prior to 2023 performed well with e-fuels, and that engines launched since then were developed to utilize these alternative fuels from the outset.
The Stellantis-owned brands Peugeot and Fiat suggested that e-fuels could be "a competitive drop-in alternative to fossil fuels, contributing to decarbonize the existing car fleet - assuming favorable financial and regulatory conditions."
A major challenge is that e-fuels are extremely pricey, costing around $14 a gallon - almost four times the price of gasoline in the US, according to Rob West, an energy analyst at Thunder Said Energy.
Saudi Aramco has two e-fuel projects under construction: one in Spain to produce 50 barrels a day of e-kerosene for jet engines, and another in Saudi Arabia to create 35 barrels a day of e-gasoline. However, these quantities are minuscule compared to Saudi Aramco's net refining capacity of over 4 million barrels a day.
Al-Khowaiter hoped the plants would be operational by 2027 and stated that Saudi Aramco had invested "several hundred million dollars" into the projects. As the businesses grow, Saudi Aramco plans to invest more capital.
"The goal is to provide a supply of fuel for carmakers to test, as well as for Formula 1 and other forms of motor racing," he said. Al-Khowaiter also noted that the e-kerosene supply would help regulators to comprehend and certify the new aviation fuel. The EU has mandated airlines to commence using e-kerosene by the end of the decade and aims for the fuel to account for 35% of total fuel use by 2050.
While it will take time before e-fuel prices start to decrease, Saudi Aramco anticipates they will help hybrid cars, in particular, approach the lifetime emissions of an electric car.
"The other advantage of these fuels is that they can impact 90% of the existing fleet, as opposed to the 10% of new cars sold," Al-Khowaiter continued.
The car industry has begun embracing the longer lifeline for hybrids, following the EU's relaxation of emissions regulations for petrol cars, as well as US President Trump's threat to roll back consumer tax credits for EVs. In the UK, the government has also scaled back its EV sales targets, allowing full and plug-in hybrids to be sold until 2035.
According to Al-Khowaiter, Saudi Aramco is receiving interest in its e-fuels project from carmakers in the EU and China, and any demand for biofuels could "easily be replaced" by e-fuels by 2050. "We believe today that e-fuels are cost competitive with second and third generation biofuels," he concluded.
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E-fuels, synthetically produced fuels using renewable electricity, carbon dioxide, and water, are gaining traction as a viable clean fuel solution. Although they face pricing obstacles and are in the early stages of development compared to biofuels, e-fuels offer advantages in infrastructure compatibility and applicability to sectors that are difficult to electrify, such as aviation, shipping, and heavy-duty transport. Cost reductions are expected throughout the 2020s and beyond as the market matures, enabling e-fuels to play a crucial role alongside second and third-generation biofuels in the comprehensive decarbonization of transportation.
- Saudi Aramco, the global oil leader, is investing in synthetic fuels derived from renewable energy, anticipating that traditional internal combustion engines will persist in the transportation industry.
- In the market, electric vehicles have found their place but will not entirely replace other solutions like internal combustion engines, claims Ahmad Al-Khowaiter, a senior executive at Saudi Aramco.
- Saudi Aramco has taken a wager on the future of internal combustion engines, with a 10% stake in Horse Powertrain and a collaboration with Chinese automaker BYD.
- Partnerships with automakers such as Stellantis and Toyota indicate that e-fuels, produced from renewable energy, carbon dioxide, and water, are considered as a means to reduce emissions and decarbonize transport.
- E-fuels are envisioned as a drop-in alternative to fossil fuels and can potentially prolong the lifespan of internal combustion engines in the existing vehicle fleet.
- The European Union aims for e-fuels to represent 35% of total fuel use by 2050, as they would help regulate emissions in various industries, including aviation.
- Despite the high initial costs of e-fuels, Saudi Aramco projects that their prices will drop as the market matures and e-fuels become competitive with second and third-generation biofuels.
- Saudi Aramco is collaborating with carmakers in the EU and China to replace biofuel demand with e-fuels by 2050, demonstrating the growing interest in the clean fuel solution as a key player in the fight against climate change and for the comprehensive decarbonization of the transportation industry.
