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Cepsa partners with Alfa Laval for decarbonisation transformation

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Spanish multinational oil and gas company Cepsa has partnered with Sweden’s global heat exchange specialists Alfa Laval (NDAQ:ALFA) to drive its ambitious decarbonisation plan, which includes reducing its Scope 3 emissions by 15-20% by 2030.

  • Alfa Laval will provide process optimisation services and heat exchangers to Cepsa’s two Spanish renewable energy plants.
  • Cepsa plans to reduce scope 1 and 2 emissions by 55% and scope 3 emissions by 15-20% by 2030, from a 2019 base, on its path to 2050 net zero.
  • Cepsa’s bid to transform itself from a traditional fossil fuel business may serve as a energy transition model for other oil and gas companies.

Cepsa plans to transform its role as a traditional oil and gas business to help accelerate the transition to green energy in Europe. The firm has also committed €7-8 billion in investment to do so. 

Forming partnerships and alliances is a big part of its 2030 Positive Motion Strategy, which was launched in March 2022.  This strategy is centred around the transformation of its energy centres which will be developed to produce renewable and low-carbon fuels, boost electric vehicle charging infrastructure, and help other companies achieve their decarbonisation goals.

Given that the UAE’s Mubadala Investment Company is its majority investor, its interesting to see the focus on diversifying away from oil and gas.

Positive motion strategy will drive Cepsa’s transition

Cepsa has set its sights on being carbon neutral by 2050, with some respectable medium term 2030 targets. The company intends to reduce scope 1 and2 emissions by 55%, and Scope 3 by 15-20% by 2030, although clarity on up and downstream emissions would be useful.

It will do this through a focus on developing 7 GW of renewable energy and 2 GW of green hydrogen, and it has plans to create the largest e-mobility ecosystem and ultra-fast, on-the-go charging network in Spain and Portugal. It will do this via the transformation of its existing network of petrol stations.

Cepsa’s energy parks lie at the heart of its transformation strategy, which it plans will be green energy hubs in southern Europe, and also serve as European gateways for exporting green hydrogen.

The company also plans to produce 2.5 million tons of biofuel and  0.8 mega tons of sustainable aviation fuel, in order to address a range of markets. 

Cepsa expects to derive over 50% of its operating profits from sustainable ventures by 2030 and will invest 60% of a total planned outlay of €7-8 billion to do this, starting in 2023.

Energy parks can serve as energy transition model

In its bid to become a leader in enabling the transition to green and sustainable energy, Cepsa is converting its traditional refineries into sustainable energy parks.

The company expects to develop new products and processes to decarbonise its own processes, and in turn help others to do the same. 

Cepsa believes locating the parks next to major ports in southern Europe will give large industrial customers access to biogas and 2G biofuels, and green hydrogen.

The company plans to build 7 GW of solar and wind energy capacity at these port locations, of which 1.5 GW is already connected to the grid.

In 2021, Cepsa signed a partnership agreement with Spanish electric utility Endesa’s (MCE:ELE) electric mobility division, Endesa X, to leverage its existing electric vehicle charging network in building its own offering.  

The partnership with Alfa Laval seems less mutually beneficial, although it will enhance both companies’ position in helping accelerate the transition to clean energy.

Alfa Laval partnership will improve energy efficiency at energy parks

Cepsa’s partnership with ALFA will help improve energy efficiency, and hence CO2 emissions, by using its heat exchangers and process optimisation services.

ALFA’s products improve energy efficiency and heat recovery, while its services provide the expertise to improve production processes in the markets it serves, energy, marine, and food and water industries.

The company began serving the oil and gas refinery market in 2005 via an acquisition in France, and has since also developed expertise in biofuel and edible oil refining.

Cepsa has recently begun producing second generation (2G) biofuels, using used cooking oils, at one of its energy parks, which will likely benefit from its partnership with Alfa Laval. 

Judging Cepsa’s transformation depends on the view you take

Cepsa began as a private oil company in Spain in 1929, adding a refinery and exploration and production businesses in the subsequent decades, and subsequently expanded into Portugal and the UK.

Complete ownership of Cepsa transferred to the sovereign wealth fund of Abu Dhabi in 2011, which in turn sold a 37% stake to the Carlyle Group (NMS:CG) in 2019.

In 2020, Cepsa announced its first plans to transform its business, creating a new executive board and ESG committee.renewables en

A sceptical view of Cepsa’s transformation may be to say that it is sending a particular message to the sector,  or looking at ways of masking the remaining heavy emitting businesses in its portfolio.

The plan for these remaining businesses, chemicals, and exploration and production of oil and gas, is to serve as cash cows to fund the company’s transition.

Hence, Cepsa’s transformation can also be viewed as an attempt to correct past wrongs, and perhaps serve as a model for other oil and gas companies to follow.

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