Ian TaylorWith the refining sector adapting to meet the pressures of decarbonisation, as much as 3.6 million barrels a day (mmbd) of global refinery capacity could be under high-risk of closure, according to Wood Mackenzie’s latest refinery closure threat analysis.
The report shortlists 120 out of 465 refining assets as high, medium, or low risk of closure based on 2030 net cash margin (NCM) forecasts. The total global refinery capacity at some risk of closure amounts to 19.95 mmbd, equating to 21.3% of the 2023 total capacity.
Almost half the sites seen as under most threat are located in Europe.
Emma Fox, Senior Oils and Chemicals Analyst at Wood Mackenzie, commented: ‘The European refinery sector will come under pressure in the mid-term as gasoline margins weaken and pressure to decarbonise increases. This will impact operating costs to such a degree that closure may be the only option.’
Wood Mackenzie said that the seven high-risk sites in China are ‘all independent assets that will suffer from the threat of competition against larger integrated sites, a more competitive domestic market as well as governmental policies in China that are not favourable to stand-alone operators’.
China also has 12 sites that Wood Mackenzie assessed as low or medium risk with the majority having high emissions and no low-carbon investments currently planned.
Outside of China there are 23 sites in Asia Pacific assessed by Wood Mackenzie as being medium or low risk of closure, with Japan accounting for 15 of these sites.
‘The cost of decarbonisation for independent operators may be too high to justify keeping many of the sites in the Asia Pacific region operational, despite 70% of them having some degree of petrochemical integration,’ commented Fox. ‘As the decade progresses and more pressure is asserted to lower emissions some difficult decisions will have to be made by operators.’
The report said that future carbon taxes could take up a ‘significant portion’ of a refinery’s operating costs so it advised that: ‘Facilities that invest in decarbonisation strategies could significantly improve their relative competitiveness.’
‘Standalone sites with high emissions are typically the first to face portfolio divestments or closures,’ concluded Fox. ‘But as the world embraces the energy transition, refiners need to adapt to survive.’
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Rhys Berry
