The tightening of environmental and tax policies, along with expectations of a decline in oil demand, could lead to a 21% reduction in global refining capacities by 2035. This is outlined in a study by the company "Implementa," which was reviewed by "Izvestia." According to experts, around 10% of such facilities have already closed globally in the last decade, predominantly in China, Europe, and North America. This article examines Russia's position in the market and the future of domestic refineries amid the global transformation of the industry.
What Are the Prospects for Global Refining?
Over the past decades, environmental and tax policies in the refining sector have undergone significant changes in line with global ecological trends, a shift towards sustainable development, and alterations in the global energy landscape. In this context, global refining capacities have already decreased by about 10% (or 9 million barrels per day), with an additional 21% (or 18.4 million barrels per day) potentially closing by 2035, as noted in "Implementa's" study.
From 2015 to 2025, the highest volume of closures occurred in the Asia-Pacific region (19%) and China (30%). Europe accounted for 20% of the global reduction, with North America, the Middle East, and other regions seeing reductions of 5% and 7%, respectively.
According to the study, during 2015-2018, China primarily closed small, low-technology refineries with a total capacity of 1.8 million barrels per day. Experts attribute these closures to the tightening of environmental and tax policies.
In Europe, the La Mede refinery (with a capacity of 153,000 barrels per day) was closed in 2016 due to low efficiency, and three years later, the site was repurposed for biodiesel production. In 2019, American Philadelphia Energy Solutions (with a capacity of 330,000 barrels per day) went bankrupt, and its facilities were later converted into warehouses and distribution centers for non-fuel products.
Looking ahead, "Implementa" predicts a significant shift in the structure of refinery closures by region. By 2035, Europe could lose nearly half (49%) of its refining capacities, equating to 6.5 million barrels. In China and other Asia-Pacific countries, closures are expected to be 16% and 18%, respectively, while the Middle East may lose 41% of its capacities and North America 7%.
According to Ivan Timonin, project manager at the company, 101 out of 420 refineries are at risk. The oldest, smaller, and expensive facilities lacking deep processing capabilities and petrochemical integration are the most vulnerable.
How Is the Green Agenda Impacting Refining?
According to the company Energy Monitor, in 2024, China leads in refining capacity with nearly 18.5 million barrels of oil per day, while the U.S. and Russia follow with figures around 18.4 million and 6.7 million respectively.
Ekaterina Kosareva, managing partner of "VMT Consulting," stated that there is a noticeable tightening of environmental standards and tax legislation worldwide.
"Many countries have intensified requirements regarding emissions, fuel quality, and environmental monitoring. 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 aimed at achieving net zero greenhouse gas emissions (climate neutrality) by 2050," the expert reminded.
Ivan Timonin noted that the reduction in global refining capacities is not caused by a sharp decline in demand for oil products but rather by a decrease in the economic efficiency of certain refineries.
"Multiple factors contribute to this pressure: a slowdown in gasoline and diesel demand, electrification of transport, rising environmental and carbon costs, alongside competition from large modern complexes in Asia and the Middle East. China, which has long been the main driver of hydrocarbon demand growth, may reach its peak oil consumption between 2027-2030. Meanwhile, the share of traditional cars with internal combustion engines in global sales is expected to drop below 50% by the end of the decade," the expert highlighted.
According to Sergey Tereshkin, CEO of Open Oil Market, the deceleration of oil demand growth will slow down the introduction of new capacities in China, while in Europe and North America, refinery capacities will continue to decline.
"Overall, the industry will adapt to changing market conditions: demand for aviation fuel, as well as low-sulfur fuel oil and marine gasoil, will continue to grow, while the consumption of automotive gasoline is likely to plateau," Ivan Timonin noted.
What Awaits Russian Refineries?
As of 2025, around 30 large oil refineries and approximately 80 mini-refineries operate in Russia, with a total capacity estimated at 328 million tons of oil annually.
The country's energy strategy through 2050 aims to maintain refining volumes while increasing the export of oil products. According to the target scenario, production is expected to be around 275 million tons, with foreign shipments rising from 132 million tons in 2024 to 146 million tons by 2050.
The strategy's authors expect this to be achieved through a transition of Russian motorists to gas fuel and other types of eco-friendly transportation. The depth of processing at refineries is also projected to increase from 84.4% in 2024 to 95% by 2050.
Ivan Timonin posited that Russia operates under a different paradigm compared to Europe or China. For domestic refining, the main challenges arise not only from the energy transition but also from sanctions, logistics, access to technologies, and the resilience of infrastructure.
Meanwhile, Russian exports have already significantly adapted to new geography. The share of friendly countries in the export of domestic oil and gas condensate increased from 41% in 2021 to 96% in 2025; in oil products, this share rose from 18% to 80%, despite the physical volume of exports falling 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 around 62% of global oil consumption. Therefore, for Russia, the issue is not merely about mass closures of refineries but rather the technological and economic resilience of the industry. The priorities include chemicalization, deep processing, digitalization, import substitution of critical technologies, and the production of higher value-added products," Ivan Timonin emphasized.
Another factor is the slower transformation of domestic demand, the expert pointed out.
“In Russia, gas fuel is developing faster than electric vehicles; however, the overall share of passenger cars running on alternative fuels is still less than 5%. This indicates that the domestic oil product market will transform more slowly than in Europe, but it does not eliminate the need for modernization of refineries,” he stated.
According to Sergey Tereshkin, it is important for Russia to maintain its market position as one of the largest suppliers of diesel fuel. He described this task as realistic, noting that the electrification of freight transport will occur at a slower pace than that of passenger vehicles.
In Russia, starting from 2028, a "reverse excise tax on oil raw materials" mechanism has been implemented, which incentivizes companies to modernize their refineries, Ekaterina Kosareva noted.
"I do not rule out that low-technology mini-refineries currently struggling to sell products in both external and internal markets due to price pressure from petrochemical monopolists may close. However, modern refining complexes will continue to develop. Currently, at least two new plants are being developed in the Far East," she pointed out.
In her view, the West is attempting to artificially impose a specific timeline on the green agenda at the legislative level, not allowing the market to develop organically, which could lead to serious future fuel crises.
Source: Izvestia
