Oil refining sector at a crossroads. Without transformation, closures threaten

Consultancy Wood Mackenzie has published an outlook on global refinery capacity closures through 2035. The oil and gas sector is currently going through a period of uncertainty, with continued efforts to decarbonise entire economies on one side and a certain retreat from these efforts on the other, driven not least by the arrival of the Donald Trump administration.

According to Wood Mackenzie estimates, refineries with a capacity of approximately 1.1 million barrels per day will close by 2035, representing around 5.5% of global capacity. There are several reasons for this, including the lack of competitiveness of smaller or technically outdated facilities, insufficient investment in decarbonisation technologies and a growing focus on complex, integrated petrochemical operations.

The trend is by no means limited to refineries in developing regions; it is also affecting the European market, where many facilities have long been struggling with low margins. At the same time, regulations are tightening—not only those related to emissions.

According to the same analysis, a further 1.2 million barrels per day of capacity could be shut down between 2035 and 2050. The ability of refineries to adapt to future market and regulatory requirements will play a key role, whether through modernisation, a shift to alternative fuel production or deeper integration with petrochemicals. Facilities that fail to make these changes will face closure or a major restructuring of their business model.

The situation in Europe

The energy sector is undergoing a major restructuring, accelerated by geopolitical tensions, pressure to reduce emissions and changes in demand for oil products. Major oil companies such as Shell and BP are reviewing their strategies. Although they have long expressed support for the green transition, in recent years they have slowed investment in renewables and renewed their focus on traditional oil and gas.

Over the medium term, the next 10 years are expected to bring growth in demand for fossil fuels, followed by a gradual decline. This creates a degree of schizophrenia in the markets, making it significantly harder for companies in the oil and gas sector to plan for the future.

​According to a panel of experts attending the Financial Times Commodities Global Summit, European refineries will need to undergo a major transformation over the next decade to adapt to the energy transition, or risk closure by 2035.

"In 10 years, most refineries will either move towards becoming biorefineries... or they will electrify and switch to low-carbon hydrogen and low-carbon fuels," said Ruth Herbert of Essar Energy Transition. 

The trend is already evident. For example, the Grangemouth refinery in Scotland is being converted into an import terminal, while Shell’s Wesseling plant in Germany is ending crude oil processing.

In the Czech Republic, oil processing is carried out by ORLEN Unipetrol’s two refineries, in Litvínov and Kralupy nad Vltavou. The Litvínov refinery is among the older facilities, but is the more significant in terms of its product mix and volume. The Kralupy refinery is somewhat more modern, although it processes relatively small volumes of crude oil by European standards.

State-owned pipeline operator MERO completed technical work to expand the capacity of the TAL pipeline at the end of last year, enabling increased supplies of non-Russian oil. The first tanker carrying oil from Norway arrived at the Italian port of Trieste, from where the oil will be transported via the TAL and IKL pipelines in the second half of April.