The tightening of environmental and tax policies, coupled with expectations of a decline in oil demand, may lead to a reduction of up to 21% in global refining capacities by 2035. This is highlighted in a study by "Implementa," which was reviewed by "Izvestiya." According to experts, approximately 10% of such facilities worldwide have already closed over the past decade. The majority of these closures have occurred in China, Europe, and North America. What position does Russia hold in this market, and what awaits domestic refineries amid the global transformation of the industry — in this article by "Izvestiya."
The Prospects of Global Oil Refining
Over the past decades, environmental and tax policies in the refining sector have undergone significant changes, influenced by global ecological trends, the shift towards sustainable development, and changes in the global energy landscape. Against this backdrop, approximately 10% of refining capacities (9 million barrels per day) have already been reduced globally, with another 21% (18.4 million barrels per day) under threat of closure by 2035. This is outlined in a study by "Implementa," which was reviewed by "Izvestiya."
From 2015 to 2025, the majority of closures occurred in Asia-Pacific countries (19%) and China (30%). Europe accounted for 20% of the global reductions, while North America, the Middle East, and other nations each saw declines of 5% and 7%, respectively.
As noted in the study, from 2015 to 2018, China primarily saw the closure of small, low-tech refineries with a total capacity of 1.8 million barrels per day. Experts also point to the tightening of environmental and tax policies as contributing factors.
In Europe, the La Mede refinery (153,000 barrels per day) was shut down in 2016 due to low efficiency. Three years later, the site was repurposed for biodiesel production. In 2019, the American Philadelphia Energy Solutions (330,000 barrels per day) declared bankruptcy, with the site later converted into storage and distribution centers for non-fuel products.
Looking ahead, according to "Implementa," the structure of refinery closures by region is expected to change significantly. By 2035, Europe may lose nearly half of its capacities — 49% — or 6.5 million barrels. China and other Asia-Pacific countries are expected to see closures of 16% and 18% in refining capacities, respectively, while the Middle East could lose 41% of its capacities, and North America is projected to lose 7%.
According to Ivan Timonin, project manager at the company, a total of 101 out of 420 refineries are at risk. The most vulnerable are older, smaller, and more costly refineries lacking deep processing and petrochemical integration.
Impact of the Green Agenda on Oil Refining
According to Energy Monitor's data for 2024, China is the leading country in refining capacity, processing almost 18.5 million barrels of oil per day. The U.S. and Russia hold the second and third spots, with figures of around 18.4 million and 6.7 million barrels, respectively.
"We are currently seeing a tightening of environmental standards and tax legislation worldwide," stated Ekaterina Kosareva, managing partner of "VMT Consult."
— "In many countries, emission standards, fuel quality requirements, and environmental monitoring have become more stringent. Under the EU's 'Green New Deal,' the goal is to achieve carbon neutrality by 2050, which will significantly impact the oil and gas industry. Russia also has a strategy in place to achieve net-zero greenhouse gas emissions (climate neutrality) by 2050," the expert recalled.
Ivan Timonin stated that the decline in global refining capacities is not primarily due to a dramatic fall in demand for petroleum products, but rather the deteriorating economic efficiency of some refineries.
— "Several factors are contributing to this pressure: a slowdown in demand for gasoline and diesel, electrification of transport, rising environmental and carbon costs, and competition from large modern complexes in Asia and the Middle East. China, which has long been a major driver of hydrocarbon demand, may reach its peak oil consumption between 2027 and 2030. Moreover, the share of traditional internal combustion engine vehicles in global sales is projected to fall below 50% by the end of the decade," the expert noted.
Sergey Tereshkin, CEO of Open Oil Market, noted that as demand for oil growth slows, the introduction of new capacities in China will decelerate, while refining capacities in Europe and North America will diminish.
— "Overall, the industry will adapt to changing market conditions: demand for jet fuel, low-sulfur marine fuel, and gas oil will continue to grow, while consumption of automotive gasoline is likely to plateau," Ivan Timonin stated.
What Awaits Russian Refineries
In Russia, as of 2025, there are approximately 30 large oil refineries and about 80 mini-refineries in operation, with a total capacity estimated at 328 million tons of oil per year.
The country's energy strategy project through 2050 sets the objectives to maintain processing volumes while increasing the export of petroleum products. The target scenario anticipates production of about 275 million tons, with shipments abroad growing from 132 million tons in 2024 to 146 million tons by 2050.
Authors of the strategy expect this will be facilitated by the transition of Russian motorists to gas-powered fuel and other types of environmentally friendly transport. The depth of processing at refineries should also increase from 84.4% in 2024 to 95% by 2050.
According to Ivan Timonin, Russia is operating under a different logic compared to Europe or China. For domestic refining, the main challenges stem not just from the energy transition, but also from sanctions, logistics, access to technologies, and the resilience of infrastructure.
Already, Russian exports have adapted significantly to the new geography. The share of friendly countries in the export of Russian oil and gas condensate increased from 41% in 2021 to 96% in 2025, while for petroleum products, it jumped from 18% to 80%, even though the physical volume of exports decreased from 133 million tons to 107 million tons.
— "In the long term, demand is shifting towards countries outside the Western bloc: by 2040, they may account for about 62% of global oil consumption. Therefore, for Russia, the issue is not so much about the mass closure of refineries, but about the technological and economic sustainability of the industry. The priorities are chemical processing, deep refining, digitalization, substitution of critical technologies, and producing products with higher added value," Ivan Timonin emphasized.
A separate factor is the slower transformation of domestic demand, the expert highlighted.
— "In Russia, the development of gas-powered fuel is advancing faster than that of electric vehicles, yet the overall share of passenger cars using alternative fuels remains below 5%. This means that the domestic petroleum products market will change at a slower pace than in Europe, but this does not negate the need for refinery modernization," he said.
According to Sergey Tereshkin, it is critical for Russia to maintain its market niche as one of the largest suppliers of diesel fuel. He believes this is a realistic goal, as the electrification of freight transport will proceed more slowly than that of passenger vehicles.
In Russia, starting from 2028, a "reverse excise tax on oil raw materials" mechanism is in place, which incentivizes companies to modernize their refineries, Ekaterina Kosareva noted.
— "I wouldn't rule out that lower-tech mini-refineries in Russia may close down, as they are currently struggling to sell their products both on external and internal markets due to price pressures from petrochemical monopolists. However, modern refining complexes will continue to develop. Currently, there are at least two plants being planned in the Far East," the expert stated.
In the West, in her opinion, the green agenda is being artificially forced into specific timelines at the legislative level, preventing the market from developing organically, which could result in significant fuel crises in the future.
Source: Izvestiya
