- Turnover of $279 billion in 2021 (2020 $140 bn)
- 7.6 million barrels a day of crude oil and products delivered in 2021 (2020 7.1mb/d)
- 30%+ increase across transitional volumes traded
- 1.2 GW renewable generation operational and planned, investments across the energy spectrum
Statement from Russell Hardy, CEO, Vitol:
The cautious optimism of 2021 seems a long way behind us. The situation in Ukraine is desperately sad and the human suffering immeasurable. Those of us not directly affected have had our worldview shaken. These last few weeks have reminded us that peace in Europe cannot be taken for granted.
Energy remains at the forefront of the news. Alongside global recognition of the need for the energy transition, is the more immediate issue of energy security and affordability. Energy markets have responded to political events in the near term through volatility. In the longer-term trade flows will adjust, but prices are likely to remain elevated for some time.
Twelve months ago, the worst horrors of Covid appeared to be over. As life in many societies began to get back to normal, so oil demand rebounded, with all products apart from jet fuel seeing strong growth and demand expected to outpace 2019 levels in 2022. Notwithstanding the emergence of the Omicron variant, demand recovered across many markets. This, combined with restrained growth in production, caused stocks to draw 2 m b/d, falling to multi-year lows.
Nonetheless, other markets stole the headlines in 2021, with gas and power markets experiencing unprecedented volatility in the early autumn and December through fears of shortages, brought about by an unseasonably cold and late spring and subsequent failure to replenish European stocks over the summer. In short, the physical energy markets were already tight as we entered the current crisis.
More positively, considerable progress was made at COP26 in autumn 2021, with many governments and corporates reiterating commitments to accelerate the energy transition. This included agreement on the framework around carbon offset trading and standards which we believe will spur innovation and development in carbon markets. This will, in turn, facilitate the allocation of resources to carbon mitigation.
Crude oil and products
Crude oil and products remain the core of our business. The resurgence of oil demand means that 2021 volumes of 367 m MT are almost back to 2019 levels across all products except for jet which remained 22% down.
Our direct customer proposition is growing with the expansion of our bunkering service into new markets and deploying new, low-carbon technologies, such as LNG dual fuel supply ships in Singapore. Our efforts in this area have been recognised by the Maritime Port Authority of Singapore. We also supplied and facilitated the first sustainable aviation fuel (SAF) flight from London Heathrow.
We continue to complement our trading business with investment in assets. Whilst we anticipate oil demand falling in the long term, demand is likely to continue to grow for the next decade. Given limited investment in production, we expect a ‘demand gap’ to widen over the next few years. Hence, last year our US upstream company Vencer acquired producing assets from Hunt Oil, adding 40 mboepd of production to our portfolio and we continue to look for high quality producing assets in which to invest.
On the demand side, growth will be driven by the developing economies. In this context, we were pleased to have our offer for Vivo Energy, a Shell and Engen licensee in Africa, accepted. Africa continues to be a growth market for oil products and Vivo has a presence in 23 countries, over 2,700 employees and a network of 2,400 service stations.
At the same time, we recognise the need to position the oil business for the transition. We are challenging all our hydrocarbon-based assets to review their strategies in the context of the transition, to leverage their footprint and develop localised and appropriate solutions. This includes repurposing refining and storage assets as required. We were pleased to welcome Dev Sanyal as chief executive of Varo Energy, a European mid and downstream company which we co-founded in 2012. Dev’s strong background in low-carbon energy businesses is indicative of the strategic direction in which we see many of our assets moving.
Transitional energy solutions
Over the last few years we have invested in our transitional capabilities and expertise. On the trading side, the team has grown significantly as we anticipate gas and LPG playing a long-term role in the energy transition. In 2021 this was reflected in our LNG volumes delivered which increased to 12.9 m MT. Power and gas volumes also grew and were up 30+%.
As mentioned, last year the gas and power markets experienced unprecedented levels of volatility, testing the resilience of markets and their participants. For us, this period highlights the need for regulators to consider market integrity and liquidity during times of severe stress.
The roll out of renewables continues to require support from more traditional forms of generation. In February we completed our acquisition of four CCGTs from Drax, bringing our total gas-fired generation portfolio in the UK to 3.3 GW. Two of these assets are developing hydrogen and and/or carbon capture and storage solutions, enabling us to develop an understanding of the challenges of moving large-scale industrial infrastructure to a low-carbon future.
Sustainable energy solutions
This remains a relatively small part of our business, but one where we are increasingly focused. We have committed $1.3 billion to identified renewable projects and our renewable generation portfolio contains operational and planned projects representing 1.2 GW. Our strategy continues to evolve, but is broadly focused on generation and transport solutions.
In the US we are expanding our portfolio of community-based solar and have added investments in large-scale solar in India. We also acquired the 250 MW Big Sky Wind farm in Illinois and have invested $270 million in repowering the farm to increase output by 60%. In Europe, our cornerstone decarbonisation project is Humber Zero, which aims to remove 8 million tonnes of CO2 per annum by 2030. We are also investing in innovative technologies, such as WAGA’s proprietary bio-methane from landfill clean capture proposition, as well as circular economy solutions such as hydrocarbon recycling.
Across the transport sector we are looking at a range of offerings, technologies and solutions. In the first instance we are seeking to capture opportunities in electric vehicles through municipal and private fleet solutions. In India we have invested in SUN Mobility, which offers a battery supply and swapping service for small electric vehicles. For heavier and longer-distance vehicles we expect gas-for-transport solutions to be increasingly deployed. Our investment in Liquind, with a network which currently supplies LNG to trucks in Germany will enable us to move to biofuels and potentially hydrogen for vehicles in the long term.
We have a long-established presence in carbon markets which we shall continue to build. The developments at COP 26 were welcomed, as is the increasing interest in the voluntary carbon market from a growing range of participants looking to mitigate emissions.
Our business will remain the efficient distribution of physical energy. The successful development of all these new technologies will require an actively traded market in the energy sector and we are committed to participating in nascent markets to further their development.