The tightening of environmental and tax policies, alongside the anticipation of declining demand for oil, could result in a reduction of global refining capacities by 21% by 2035. This is highlighted in a study conducted by Implementa, which was reviewed by Izvestia. According to experts, approximately 10% of such facilities have already been closed worldwide over the past decade, primarily in China, Europe, and North America. This article will explore Russia's position in this market and the outlook for domestic refineries amid the global transformation of the industry.
What are the Prospects for Global Oil Refining?
Over recent decades, environmental and tax policies in the oil refining sector have undergone significant changes, linked to global ecological trends, the transition to sustainable development, and shifts in the global energy landscape. Thus far, approximately 10% of refining capacities (9 million barrels per day) have been reduced worldwide, with an additional 21% (18.4 million barrels per day) at risk of closure by 2035, according to the Implementa study referenced by Izvestia.
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, while North America, the Middle East, and other countries contributed 5% and 7%, respectively.
The research notes that in China, from 2015 to 2018, mainly small, low-technology refineries with a total capacity of 1.8 million barrels per day were closed. Experts cite the tightening of environmental and tax regulations as one of the contributing factors.
In Europe, the La Mede refinery (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, the American Philadelphia Energy Solutions (330,000 barrels per day) declared bankruptcy, after which warehouses and distribution centres for non-fuel products were established on its site.
Looking ahead, according to Implementa, the structure of refinery closures by region is expected to change significantly. By 2035, Europe could lose nearly half—49%—of its capacities, equating to 6.5 million barrels. Refining in China and other Asia-Pacific countries may decrease by 16% and 18%, respectively, while the Middle East could lose 41% of its capacities and North America 7%.
According to Ivan Timonin, a project manager at the company, a total of 101 out of 420 refineries are at risk. The most vulnerable are old, small, and costly plants lacking deep processing and petrochemical integration.
How the Green Agenda Affects Oil Refining
According to Energy Monitor, as of 2024, China leads the world with nearly 18.5 million barrels of refining capacity per day. The USA and Russia follow in second and third places with approximately 18.4 million and 6.7 million, respectively.
Ekaterina Kosareva, Managing Partner at VMT Consulting, stated that there is a noticeable tightening of environmental standards and tax legislation globally.
— In many countries, demands regarding emissions, fuel quality, and environmental monitoring have intensified. Under the EU's Green New Deal, the goal of achieving carbon neutrality by 2050 has been set, significantly impacting the oil and gas industry. Russia also operates under a strategy aimed at achieving net-zero greenhouse gas emissions (climate neutrality) by 2050, — the expert reminded.
According to Ivan Timonin, the reduction in global refining capacities is not primarily due to a sharp decline in the demand for oil products but rather a deterioration in economic efficiency for some refineries.
— The pressure is being exerted by several factors: a slowdown in demand for gasoline and diesel, the electrification of transport, rising environmental and carbon costs, as well as competition from large, modern complexes in Asia and the Middle East. China, long the main driver of hydrocarbon demand growth, may peak in oil consumption as early as 2027–2030. Meanwhile, the share of traditional internal combustion engine vehicles in global sales is expected to fall below 50% by the end of the decade, — the expert highlighted.
According to Sergey Tereshkin, CEO of Open Oil Market, given the slowing demand for oil, the introduction of new capacities in China will decelerate, whereas in Europe and North America, refining capacities will continue to decline.
— Overall, the sector will adapt to changing market conditions: demand for aviation fuel, as well as for low-sulphur fuel oil and gas oil for marine transport, will continue to grow, while automotive gasoline consumption is likely to plateau, — noted Ivan Timonin.
What Awaits Russian Refineries?
In Russia, as of 2025, approximately 30 large refineries and about 80 mini-refineries are in operation, with a total capacity estimated at 328 million tonnes of oil per year.
The country’s energy strategy project until 2050 aims to maintain processing volumes while increasing product exports. The target scenario predicts production to reach about 275 million tonnes, with exports rising from 132 million tonnes in 2024 to 146 million tonnes by 2050.
The strategy’s authors expect this to be achieved through a transition of Russian motorists to gas motor fuel and other types of environmentally friendly transport. The depth of processing at refineries is projected to increase from 84.4% in 2024 to 95% by 2050.
Russia, according to Ivan Timonin, is operating under a different logic compared to Europe or China. For domestic refining, the primary challenges are not just the energy transition, but also sanctions, logistics, access to technologies, and infrastructure resilience.
Simultaneously, Russian exports have already significantly adapted to the 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, while for oil products, it rose from 18% to 80%, despite the physical volume of exports decreasing from 133 million tonnes to 107 million tonnes.
— 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 question is not so much about mass refinery closures, but about the technological and economic sustainability of the industry. The priorities are chemical processing, deep refining, digitalisation, import substitution of critical technologies, and producing higher value-added products, — stressed Ivan Timonin.
An additional factor is the slower transformation of domestic demand, the expert emphasised.
— In Russia, gas motor fuel is developing faster than electric vehicles, but the overall share of passenger cars running on alternative fuels remains below 5%. This means that the domestic oil product market will change more slowly than in Europe, but it does not negate the necessity for refinery modernisation, — he stated.
For Russia, it is essential to maintain its market niche as one of the largest suppliers of diesel fuel, believes Sergey Tereshkin. He noted that this is generally a realistic task, as the electrification of freight transport will occur at a slower pace compared to passenger vehicles.
In Russia, a mechanism for a "reverse excise on crude oil" has been in place since 2028, incentivising companies to modernise their refineries, as Ekaterina Kosareva reminded.
— I do not rule out the possibility that low-technology mini-refineries in Russia may close if they struggle with product sales in both external and internal markets due to price pressure from petrochemical monopolists. However, modern refining complexes will continue to develop. Currently, at least two refineries are under development in the Far East, — the expert noted.
In the West, she believes, green agendas are being artificially forced into specific timelines through legislative measures, preventing the market from developing organically, which could lead to serious fuel crises in the future.
Source: Izvestia
