More than a fifth of global oil refining capacity is at risk of closure, energy consultancy Wood Mackenzie found in analysis published on Thursday, as gasoline margins weaken and the pressure to reduce carbon emissions mounts.
Of 465 refining assets analysed, the consultancy ranked
about 21% of 2023 global refining capacity at some risk of closure.
Europe and China house the greatest number of high-risk
sites, putting about 3.9 million barrels per day (bpd) of refining capacity in
jeopardy, Wood Mac found, based on its estimate of net cash margins, cost of
carbon emissions, ownership, environmental investment and strategic value of
refineries.
There are 11 European sites that account for 45% of all
high-risk plants, the report found.
About 30 European refineries have already shut down since
2009, data from industry body Concawe shows, with nearly 90 still in operation.
This spate of closures have been brought on by competition
from newer and more complex plants in the Middle East and Asia as well as the
impact of the COVID-19 pandemic.
Gasoline margins are expected to weaken by the end of this
decade as demand declines and sanctions on Russia ease while expected carbon
taxes should also start to bite, the Wood Mac analysis showed.
Operating costs could go up so much that "closure may
be the only option", said Wood Mac senior oils and chemicals analyst Emma
Fox.
Meanwhile, Nigeria's huge Dangote oil refinery could bring
to an end decades-long gasoline trade from Europe to Africa worth $17 billion a
year, heaping pressure on European refineries already at risk of closure from
heightened competition.
The Dangote refinery, with capacity of up to 650,000 bpd,
began production in January but was not included in Wood Mac's analysis.
The seven high-risk sites in China are small-scale
independent refineries. Sometimes called 'teapots', these refineries are
subject to more stringent government regulations and compete with larger
integrated sites that are typically state-owned and more complex.
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