Solar power, green hydrogen, biowaste and used cooking oil: the head of refinery operator Varo Energy sees a variety of options.
Danger lurks everywhere. In the energy industry, no distinction is made whether it is a production platform, a refinery or an office building. This is what they say: The hands belong on the handrail. The Baar-based company Varo Energy is also strict. In the light-flooded offices, attention is paid to safety: visitors receive brief instructions on how to behave in the event of an emergency or what safe climbing stairs looks like.
Varo not only maintains new office spaces, which in some places are reminiscent of oases of well-being. The company, little known outside the industry, is also the operator of the only oil refinery in Switzerland in Cressier. It covers up to 30 percent of domestic petroleum needs. Varo also holds a majority stake in the Bayernoil refinery and supplies Germany with around 10 percent of total consumption.
Repurpose existing infrastructure
Varo’s roots lie in the production and distribution of fossil fuels. Varo is backed by the private equity firm Carlyle Group and Vitol, the world’s largest independent oil trader. The company under its boss Dev Sanyal has set itself ambitious climate goals: Varo wants to achieve the net zero target by 2040. This means that not only the emissions that the company emits directly during production should fall to net zero, but also the emissions from the products themselves.
This means nothing less than that Varo and the refinery in Cressier have to reinvent themselves. “We can repurpose our existing infrastructure,” says Sanyal in an interview. He took up the position two years ago to advance the company’s energy transition. Before moving to Switzerland, Sanyal, who is of Indian origin, was responsible for the renewable energy sector and also for natural gas at the British energy giant BP.
So what should Cressier look like in 2040? “We are currently working on more than 10 projects to decarbonize production processes,” says Sanyal. First of all, the CO2-Emissions from refinery operation will be significantly reduced by 2030. In addition, the co-utilization of the waste, which is to be mixed into biodiesel, will also begin.
Solar power for Cressier
The company has taken a first major step towards lower emissions with the most powerful ground-mounted solar system in Switzerland. It was commissioned last year and is expected to supply up to 60 percent of Cressier’s electricity needs at peak times.
The refinery in the canton of Neuchâtel is also the country’s largest hydrogen consumer, with a share of 70 percent. The hydrogen required for the production processes is currently produced using natural gas. However, work is underway to obtain more hydrogen in the refinery.
The other options for CO2-free hydrogen are numerous, but not yet very concrete and range from the production of green hydrogen in Switzerland to import via pipelines or the ports on the Rhine. Varo currently has two tank farms for petroleum products in Birsfelden. There have been ambitious plans for a hydrogen hub on the Rhine for some time, in which Varo is involved.
The hydrogen projects for Bayernoil are clearer. In order to cover the needs of the German refinery, a hydrogen plant with a capacity of 125 megawatts is to be built; the electricity for this will be based primarily on wind power. The energy is purchased. The aim is to replace the hydrogen still produced with natural gas with green hydrogen.
Plans are already being considered to expand capacity to 700 megawatts. There could also be additional hydrogen production in “Northwest Europe” for an existing plant. This probably means the Netherlands.
However, Sanyal leaves no doubt that investments will be made when the regulatory environment and also the subsidies are right. In Switzerland, the Federal Council wants to present its hydrogen strategy by the end of the year. Germany and the EU are already further along in this respect.
Varo runs on two engines
The question is not only how the refineries of the future will produce, but also what they will produce. The basis for investment decisions are the relevant regulations and customer demand. A lot is still in flux at the moment. “The energy transition is not a linear process,” says Sanyal.
Varo speaks of “two engines” for the company: The first engine is the traditional fossil fuel business, which continues to generate the majority of profits. A third of the investments are currently made in this area. The refineries must be maintained, and decarbonizing the processes also costs money.
However, the Baar-based company makes the majority of its investments for the “second engine”, for the business of the future: biofuels, biogas, hydrogen, e-mobility and CO2-Certificates due to carbon extraction technologies.
The approach is pragmatic, says Sanyal. This means that the company, which has more than 2,100 employees worldwide, does what it can, it concentrates on mobility, which cannot be electrified so quickly, and existing systems are largely “repurposed”. But Varo doesn’t bother with small investments. Because size means efficiency and cost advantages.
The project in Rotterdam is entirely to Sanyal’s taste: Varo is investing $600 million in a plant to produce sustainable fuel for aircraft, so-called Sustainable Aviation Fuel (SAF). The plant, which produces fuel from used cooking oil and similar bases, is being built on a refinery site in the Dutch port city and is expected to cover up to 7 percent of the EU’s 2030 SAF target.
A large production plant for biogas, which is produced using organic waste, is also being built on the border between Germany and the Netherlands. Biogas is used in areas that are difficult to electrify, such as heavy-duty vehicles and shipping. One problem the industry faces is obtaining sufficient raw materials for organic production. Varo sees itself at an advantage because it is also a large trader for oils and organic waste.
Customer-friendly instead of practical
Over the decades, Varo has built a system that optimizes the production of fossil-based fuels. If the Cressier refinery is to increasingly produce organic materials, not only the raw material will change, but also the nature of the business. It is no longer enough to efficiently produce gasoline, diesel or kerosene, although ultimately it doesn’t matter to the customer who the producer is, the main thing is that the fuels are cheap.
In the new world, a company like Varo must be more responsive to customer needs and politics and their approach to decarbonization. Because the energy transition is not a straight path, this also means that customers such as Lufthansa or the logistics company DHL must be dealt with more directly. In the past, a headquarters in Cham, which exuded the discreet charm of practicality, was sufficient. Now we need presentable, bright offices with mission statements on the walls – to attract customers and employees.