20% of the world's oil refining capacity is now at risk of closure

A fifth of the world's oil refining facilities are at risk of closure as gasoline profitability declines and pressure to cut carbon emissions increases.

About it writes Reuters agency, citing data from an analysis by energy consulting company Wood Mackenzie*. 21% of the 465 analyzed oil refining facilities are considered potentially unprofitable in 2023.

Wood Mac's research found that the largest number of properties at high risk of closure are located 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 net cash flow, carbon cost, ownership, environmental investment and strategic value of the refineries.

The report notes that there are 11 sites in Europe that account for 45% of all plants at high risk of closure. Data from industry body Concawe shows that around thirty European refineries have ceased operations since 2009, with around ninety remaining in operation today.

The wave of closures is driven by competition from newer, larger plants in the Middle East and Asia, and the impact of the COVID-19 pandemic. The analysis shows that gasoline profitability is likely to decline until the end of this decade due to falling demand and easing sanctions against the Russian Federation. Carbon taxes are also expected to come into effect. Emma Fox, senior petroleum and chemicals analyst at Wood Mac, says:

“Operating costs may rise so much that closure may be the only option.”

Meanwhile, Nigeria's giant Dangote refinery could end years of US$17 billion a year in gasoline trade from Europe to Africa. This puts further pressure on European refineries, which are already at risk of closure due to increased competition.

In China, seven of the high-risk facilities are privately owned small refineries. They are subject to stricter government regulation and compete with larger integrated plants that are largely government owned and more technologically sophisticated.

*Wood Mackenzie (WoodMac) is a global provider of data and analytics for the energy transition. Wood Mackenzie's services include data, analytics, events and consulting in the renewable energy, energy and natural resources sectors.

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