Over 20% Of The World’s Oil Refining Capacity Is At Risk Of Closure

by Charles Kennedy at zerohedge.com

More than 20% of the total global refining capacity is at some risk of closure as refining margins are set to weaken alongside demand, while carbon taxes could also burden many refiners, Wood Mackenzie has said in a recent report.

Overall, based on expected net cash margins in 2030, Wood Mackenzie has identified 121 out of 465 screened refining sites “at some risk of closure”. This represents a cumulative 20.2 million bpd of refining capacity, or 21.6% of the global capacity last year, WoodMac’s analysis showed.

The energy consultancy sees refiners in Europe and China at higher risk of shutting down because of worsened economics.  

European refineries will see their net cash margins decline from 2030 due to the unwinding of free allowances for carbon emissions, while transport fuel demand in developed countries is expected to begin to decline from next year onwards, according to WoodMac’s analysis.

“China will see liquid demand peak by 2027 and start to fall as the country actively electrifies their road transport. Non-OECD countries will enjoy continued demand growth beyond 2030, but their refiners will not be immune as global demand for transport fuels falls,” researchers and analysts and Wood Mackenzie wrote.

Europe could also see its long-standing fuel export trade volumes with Nigeria tumble after the start-up of the Dangote Refinery, Africa’s biggest, earlier this year.