Ageing oil refineries, particularly in Europe are facing an existential threat and might soon be forced to rationalise as new capacity overtakes demand. An industry survey found that around 1.4 million bpd or 9% of Europe’s refining capacity is under threat of rationalisation in 2022-2023. This was before the coronavirus pandemic, which wiped over 20% of global oil demand.
According to a Reuters report, these refineries include BP’s 377,000-bpd Rotterdam refinery, Total’s 102,000-bpd Grandpuits refinery, Petroineos’ 200,000 bpd Grangemouth refinery, and other eight plants. Last week, Gunvor said it considered to permanently shut its loss-making Belgian refinery.
Goldman Sachs expects heightened competition to cause permanent plant closures in developed countries. The investment bank forecast that global refinery utilisation rates in 2021-2024 would decline by 3% from 2019. It also expects a 6 million bpd net capacity expansion over the next five years, about 2 million bpd lower than the International Energy Agency’s estimates.
At the same time, refining capacity is expected to surge in the Middle East and the Asia Pacific thanks to their proximity to upstream production and demand centres, respectively. A separate industry survey suggested Asia Pacific’s crude distillation capacity is expected to grow by 2.7 million bpd by 2024. The Asia Pacific will contribute to 42% of the total global expansion, followed by the Middle East (23%) and North Africa (18%).
