More than a fifth of the world’s oil refining capacity is at risk of closure. Reuters reports this with reference to an analysis by energy consultancy Wood Mackenzie, Komersant ukrainskyi reports.
Of the 465 oil refining assets analysed, the consultancy estimated that about 21% of global refining capacity in 2023 is at some risk of closure.
Europe and China are home to the largest number of high-risk facilities, putting about 3.9 million barrels per day (bpd) of refining capacity at risk. Wood Mac made these conclusions based on an assessment of the refineries’ net cash margins, carbon costs, ownership, environment, investment and strategic value.
There are 11 facilities in Europe that account for 45% of all high-risk refineries, the report says.
About 30 European refineries have already ceased operations since 2009, according to data from the industry organisation Concawe. Almost 90 remain in operation today.
This series of closures has been driven by competition from newer and more powerful refineries in the Middle East and Asia, as well as the impact of the COVID-19 pandemic.
Wood Mackenzie analysts predict that by the end of the decade, petrol profitability will decline due to a decline in demand for this fuel and the easing of sanctions against Russia. This will happen against the backdrop of the growing electric vehicle market and the pressure of ever-increasing taxes on carbon emissions.
“Operating costs could rise to the point where ‘closure may be the only option’,”
– said Emma Fox, senior analyst in Wood Mac’s oils and chemicals division.
Meanwhile, Dangote’s giant refinery in Nigeria could end the longstanding $17 billion a year trade in petrol from Europe to Africa. This puts further pressure on European refineries, which are already under threat of closure due to increased competition.
The Dangote refinery, with a capacity of up to 650,000 barrels per day, began production in January but was not included in Wood Mac’s analysis.
The seven high-risk facilities in China are small independent refineries. These refineries are subject to stricter government regulations and compete with larger integrated refineries, which are usually state-owned and more complex.
Earlier it was reported that Russia would increase oil exports in March by almost 200 thousand barrels per day, and market participants expect further export growth amid drone attacks on Russian refineries.
According to JP Morgan analysts, drone attacks are likely to reduce Russian oil refining by 300,000 barrels per day, in addition to planned maintenance shutdowns.
However, according to them, the decrease in primary oil refining will lead to an increase in oil exports.