At risk of closure: one fifth of the world's refining capacity

Over the past fiscal year, more than 20% of the world's refining capacity was threatened with closure due to declining gasoline profitability and growing pressure to reduce carbon emissions. According to the analysis of energy consulting company Wood Mackenzie, this applies to a fifth of all refineries in the world.

Wood Mac's research showed that the largest number of facilities at high risk of closure are concentrated in Europe and China. This puts about 3.9 million barrels of oil per day of refining capacity at risk. The assessment is based on various factors, such as net cash flow, carbon cost, ownership, environmental investments, and strategic importance of the refineries.

According to the study, there are 11 facilities in Europe that account for 45% of all plants at high risk of closure. According to Concawe, an industry organization, about 30 European refineries have already ceased operations since 2009, and almost 90 remain in operation.

The reason for this wave of closures was competition with newer and more powerful refineries in the Middle East and Asia, as well as the impact of the COVID-19 pandemic. Wood Mac forecasts that gasoline profitability may decline by the end of the decade due to falling demand and the easing of sanctions against Russia, as well as the introduction of carbon taxes.

At the same time, Dangote's giant refinery in Nigeria may end the longstanding $17 billion a year gasoline trade from Europe to Africa. This puts additional pressure on European refineries, which are already under threat of closure due to increased competition.

In addition, the seven Chinese facilities at high risk of closure are small, privately owned refineries. They are subject to stricter government regulation and compete with larger integrated refineries, which are typically state-owned and technologically more sophisticated.