The plateauing fuel demand, stricter environmental rules, and heightened overseas competition pose existential threats to US and European oil refineries which force them to turn to biofuels. According to some oil companies, oil demand is unlikely to recover to the levels seen before the COVID-19 pandemic, accelerating the need to close refineries permanently. The International Energy Agency said that about 14% of existing refining capacity in developed countries faces risks of lower utilisation or closure in 2030. The figure is expected to grow to 50% by 2040 as global energy transition is expected to speed up.
However, closing down old refineries requires a massive capital to cover the dismantling process of heavy equipment and pipelines as well as remediating the land. Hence, refiners seek an easier alternative which is reconfiguring plants to biofuel production or import terminals. European refiners Total, Eni, BP, Repsol, and Saras have announced plans to increase their capacities to process vegetable oil and waste oil into biofuels.
Last year, Total’s La Mede refinery in France was turned into a biodiesel plant. The company has also outlined plans to convert its Grandpuits refinery into a biofuel and bioplastic production base. Meanwhile, Gunvor’s Antwerp refinery in Belgium and Neste’s Naantali plant in Finland were shut down. Neste Oyj has been investing in renewables and operates overseas biofuel plants.
In the US, Phillips 66 has said it intends to convert its crude oil refinery in Rodeo, California, crude oil refinery into a production facility that uses cooking oil and food wastes to produce bio-based motor fuels. Fellow US refiner Marathon Petroleum plans to stop crude processing at its refineries in Gallup, New Mexico, and Martinez, California. It will convert the Martinez plant into an oil-storage facility and bio-based motor fuel production.
Other US refiners such as CVR Energy, and HollyFrontier Corp, also announced plans to shut their crude refining facilities and turn it into biofuels production. A spokesman with the American Fuel and Petrochemical Manufacturers said refiners are exploring projects to meet the rising demand for renewable fuels. California, the largest fuel market in the US, has been pursuing lower carbon emissions and petroleum use in transportation by enacting the low carbon fuel standard (LCFS), which can prompt other states to follow suit.
