Fifth of Global Oil Refining Capacities at Risk of Closure

Over 20% of the world’s oil refining capacities are now under threat of closure due to a combination of declining profitability in gasoline and increasing pressure to reduce carbon emissions.

This revelation stems from an analysis conducted by the energy consulting firm Wood Mackenzie, as reported by Reuters.

Of the 465 oil refining facilities scrutinised, approximately 21% of the global capacities in 2023 are deemed potentially unprofitable.

Wood Mackenzie’s study identifies the highest concentration of at-risk facilities in Europe and China, endangering approximately 3.9 million barrels of oil per day in refining capacities.

This estimation is based on net cash flow, carbon emission costs, asset ownership, investments in environmental sustainability, and the strategic value of these refineries.

According to the report, Europe hosts 11 facilities, comprising 45% of all high-risk plants identified.

Data from the industry organization Concawe reveals that since 2009, around 30 European oil refineries have ceased operations, leaving just under 90 still operational.

The wave of closures is attributed to competition from newer and more powerful refineries in the Middle East and Asia, exacerbated by the impact of the COVID-19 pandemic.

Wood Mackenzie’s analysis suggests that the profitability of gasoline is likely to decline by the end of this decade due to decreased demand and the relaxation of sanctions against Russia.

Additionally, the implementation of carbon emission taxes is expected to further impact profitability.

“Operating costs may escalate to the extent that closure becomes the only viable option,” noted Emma Fox, a senior analyst at Wood Mackenzie specialising in oil and chemical compounds.

Meanwhile, the colossal oil refinery, Dangote, in Nigeria, could potentially disrupt the longstanding trade of gasoline from Europe to Africa, amounting to $17 billion annually.

This adds further pressure on European oil refineries already facing closure due to intensified competition.

Of the seven Chinese facilities at high risk, these are typically smaller private refineries subject to stricter government regulations, competing against larger integrated plants, predominantly state-owned and technologically more advanced.

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