Refinery Capacity Declines

Global refining capacity is declining. It went down in 2020 and again last year. The current context could accentuate this trend.

Share:

Gain full professional access to energynews.pro from 4.90€/month.
Designed for decision-makers, with no long-term commitment.

Over 30,000 articles published since 2021.
150 new market analyses every week to decode global energy trends.

Monthly Digital PRO PASS

Immediate Access
4.90€/month*

No commitment – cancel anytime, activation in 2 minutes.

*Special launch offer: 1st month at the indicated price, then 14.90 €/month, no long-term commitment.

Annual Digital PRO Pass

Full Annual Access
99€/year*

To access all of energynews.pro without any limits

*Introductory annual price for year one, automatically renewed at 149.00 €/year from the second year.

Global oil refining capacity is declining. In fact, it had met a decline for the first time in 20 years in 2020. Then, this scenario was repeated last year.

A market already under pressure

This decrease in refining capacity exacerbates an already tight market and price volatility. Thus, the prices of diesel and gasoline have risen sharply.

According to Oil Refining Industry Insights, global fuel markets will remain under stress for several years. This depends on several factors. As a result, new capacities take time to grow. Moreover, the global context does not favor the demand for hydrocarbons in view of the prospects for decarbonization.

Joseph McMonigle, General Secretary of IEF, spoke about this:

“I am concerned that investors are hesitant to invest in new refineries based on decarbonization projections that may not hold up in reality.”

To date, it appears necessary to maintain robust fuel inventories and develop plans to deal with disruptions. This is taking into account the current fragile balance of the world fuel markets. In this sense, any unexpected disruption can potentially have a disproportionate effect on prices.

J. McMonigle also wants governments to review their emergency plans. This is to ensure that we can cope with supply difficulties. He also states that additional investments should be made.

The COVID-19 pandemic had significantly weakened margins and caused the closure of refineries or distribution terminals. As a result, between 2020 and mid-2022, capacity declined by 3.8 million barrels per day. However, refining margins exploded at the beginning of the year, reaching $35 to $50 per barrel.

Russia and China have high refining capacities. However, Russia, targeted by Western sanctions, is exporting less than expected. China, on the other hand, limits its exports due to its domestic policies.

What future for global refining capacity?

Refining capacity is expected to increase by 2 million barrels per day. In fact, these new capabilities are expected by the end of the year. Nevertheless, it is possible that delays or new challenges will disrupt this trend.

This uncertainty also concerns the demand for future conventional refining capacity. The transition to electric vehicles could lead to investor reluctance.

Moreover, there is a global movement towards decarbonization. Thus, energy transitions and supportive policies mean that the sector will have to reduce its gasoline and diesel yields. As a result, investors seem to want to ensure that refineries are fit for transition.

A study reveals that independent oil and gas producers supported over 3.1 million jobs and generated $129bn in taxes, representing 87% of the US upstream sector’s economic contributions.
GATE Energy has been appointed to deliver full commissioning services for bp’s Kaskida floating production unit, developed in partnership with Seatrium in the deepwater Gulf of Mexico.
A Syrian vessel carrying 640,000 barrels of crude has docked in Italy, marking the country’s first oil shipment since the civil war began in 2011, amid partial easing of US sanctions.
Canadian crude shipments from the Pacific Coast reached 13.7 million barrels in August, driven by a notable increase in deliveries to China and a drop in flows to the US Gulf Coast.
Faced with rising global electricity demand, energy sector leaders are backing an "all-of-the-above" strategy, with oil and gas still expected to supply 50% of global needs by 2050.
London has expanded its sanctions against Russia by blacklisting 70 new tankers, striking at the core of Moscow's energy exports and budget revenues.
Iraq is negotiating with Oman to build a pipeline linking Basrah to Omani shores to reduce its dependence on the Strait of Hormuz and stabilise crude exports to Asia.
French steel tube manufacturer Vallourec has secured a strategic agreement with Petrobras, covering complete offshore well solutions from 2026 to 2029.
Increased output from Opec+ and non-member producers is expected to create a global oil surplus as early as 2025, putting pressure on crude prices, according to the International Energy Agency.
The Brazilian company expands its African footprint with a new offshore exploration stake, partnering with Shell and Galp to develop São Tomé and Príncipe’s Block 4.
A drone attack on a Bachneft oil facility in Ufa sparked a fire with no casualties, temporarily disrupting activity at one of Russia’s largest refineries.
The divide between the United States and the European Union over regulations on Russian oil exports to India is causing a drop in scheduled deliveries, as negotiation margins tighten between buyers and sellers.
Against market expectations, US commercial crude reserves surged due to a sharp drop in exports, only slightly affecting international prices.
Russia plans to ship 2.1 million barrels per day from its western ports in September, revising exports upward amid lower domestic demand following drone attacks on key refineries.
QatarEnergy obtained a 35% stake in the Nzombo block, located in deep waters off Congo, under a production sharing contract signed with the Congolese government.
Phillips 66 acquires Cenovus Energy’s remaining 50% in WRB Refining, strengthening its US market position with two major sites totalling 495,000 barrels per day.
Nigeria’s two main oil unions have halted loadings at the Dangote refinery, contesting the rollout of a private logistics fleet that could reshape the sector’s balance.
Reconnaissance Energy Africa Ltd. enters Gabonese offshore with a strategic contract on the Ngulu block, expanding its portfolio with immediate production potential and long-term development opportunities.
BW Energy has finalised a $365mn financing for the conversion of the Maromba FPSO offshore Brazil and signed a short-term lease for a drilling rig with Minsheng Financial Leasing.
Vantage Drilling has finalised a major commercial agreement for the deployment of the Platinum Explorer, with a 260-day offshore mission starting in Q1 2026.

Log in to read this article

You'll also have access to a selection of our best content.