Europe: Reducing Refining Capacity in the Face of Energy Transition

Europe's once-thriving refining industry is gearing up for a historic capacity reduction, driven by the pressures of the energy transition and falling margins.

Share:

Réduction capacité raffinage Europe

Experts predict that up to 1.5 million barrels per day could be eliminated in Europe by 2030, radically transforming the refining sector.

Energy Transition and Capacity Reduction

The golden era of European refining is coming to an end as companies face a major transformation due to the energy transition.
Demand for fossil fuels is gradually declining, driven by the rise of electric vehicles and policies to reduce CO2 emissions.
The International Energy Agency (IEA) predicts that 1 to 1.5 million barrels per day (b/d) of refining capacity in Europe could be shut down by 2030, well above the average annual shutdowns of 220,000 b/d observed to date.

Closures and Conversions in progress

Recent announcements of refinery closures in Germany, Italy and the UK demonstrate the trend.
Shell plans to cease crude processing at its Wesseling site by 2025, while BP is reducing its capacity at Gelsenkirchen by a third.
In Italy, the Livorno refinery has suspended operations, and the Grangemouth refinery in the UK may also close.
These initial announcements mark the beginning of a wider transformation, as refiners adapt their business models to new market realities.

Declining Margins and New Challenges

The war in Ukraine temporarily delayed refinery closures, boosting margins.
However, margins have now returned to more normal levels.
According to S&P Global Commodity Insights, ultra-low sulfur diesel (ULSD) margins in Northwest Europe, which peaked at $42/b in 2022, have fallen to $29.71/b in 2023.
In the long term, margins should continue to decline, with demand for diesel and gasoline falling as early as 2025.

Adjustment strategies and future prospects

Faced with this decline in margins, many refiners are choosing to close down their sites in Europe and concentrate on other regions.
ExxonMobil has cut its Western European capacity by a third since 2000, while Shell aims to have just two refineries left in Europe, focusing on North America and China.
According to forecasts, refinery utilization rates in North-Western Europe could fall from 84% in 2024 to 81% in 2027, leading to accelerated closures between 2029 and 2030.

Conversions to Biofuels

Some refiners see a long-term opportunity in converting their facilities into biofuel production sites or integrating them with petrochemical facilities.
The Livorno refinery in Italy and the La Mède and Grandpuits refineries in France are examples of this trend.
However, the profitability of these projects remains uncertain, depending heavily on government policies to stimulate demand and investment in this nascent sector.
The European refining industry is heading for a profound transformation, driven by the pressures of energy transition and global competition.
Refinery closures and conversions mark a historic turning point, requiring strategic adaptation to survive and thrive in a future where clean energy will dominate.

The expansion of the global oil and gas fishing market is accelerating on the back of offshore projects, with annual growth estimated at 5.7% according to The Insight Partners.
The Competition Bureau has required Schlumberger to divest major assets to finalise the acquisition of ChampionX, thereby reducing the risks of market concentration in Canada’s oilfield services sector. —
Saturn Oil & Gas Inc. confirms the acquisition of 1,608,182 common shares for a total amount of USD3.46mn, as part of its public buyback offer in Canada, resulting in a reduction of its free float.
OPEC slightly adjusts its production forecasts for 2025-2026 while projecting stable global demand growth, leaving OPEC+ significant room to increase supply without destabilizing global oil markets.
Talks between European Union member states stall on the adoption of the eighteenth sanctions package targeting Russian oil, due to ongoing disagreements over the proposed price ceiling.
Three new oil fields in Iraqi Kurdistan have been targeted by explosive drones, bringing the number of affected sites in this strategic region to five in one week, according to local authorities.
An explosion at 07:00 at an HKN Energy facility forced ShaMaran Petroleum to shut the Sarsang field while an inquiry determines damage and the impact on regional exports.
The Canadian producer issues USD 237 mn in senior notes at 6.875 % to repay bank debt, repurchase USD 73 mn of 2027 notes and push most of its maturity schedule to 2030.
BP revised upwards its production forecast for the second quarter of 2025, citing stronger-than-expected results from its US shale unit. However, lower oil prices and refinery maintenance shutdowns weighed on overall results.
Belgrade is engaged in complex negotiations with Washington to obtain a fifth extension of sanctions relief for the Serbian oil company NIS, which is majority-owned by Russian groups.
European Union ambassadors are close to reaching an agreement on a new sanctions package aimed at reducing the Russian oil price cap, with measures impacting several energy and financial sectors.
Backbone Infrastructure Nigeria Limited is investing $15bn to develop a 500,000-barrel-per-day oil refinery in Ondo State, a major project aimed at boosting Nigeria’s refining capacity.
The Central Energy Fund’s takeover of the Sapref refinery introduces major financial risks for South Africa, with the facility still offline and no clear restart strategy released so far.
PetroTal Corp. records production growth in the second quarter of 2025, improves its cash position and continues replacing key equipment at its main oil sites in Peru.
An explosion caused by a homemade explosive device in northeastern Colombia has forced Cenit, a subsidiary of Ecopetrol, to temporarily suspend operations on the strategic Caño Limón-Coveñas pipeline, crucial to the country's oil supply.
U.S. legislation eases access to federal lands for oil production, but fluctuations in crude prices may limit concrete impacts on investment and medium-term production, according to industry experts.
Permex Petroleum Corporation has completed a US$2mn fundraising by issuing convertible debentures, aimed at strengthening its cash position, without using intermediaries, and targeting a single institutional investor.
Petróleos de Venezuela S.A. (PDVSA) recorded $17.52bn in export sales in 2024, benefiting from increased volumes due to U.S. licences granted to foreign partners, according to an internal document seen by Reuters.
The detection of zinc in Mars crude extracted off the coast of Louisiana forced the US government to draw on its strategic reserves to support Gulf Coast refineries.
Commissioning of a 1.2-million-ton hydrocracking unit at the TANECO site confirms the industrial expansion of the complex and its ability to diversify refined fuel production.