The tightening of environmental and tax policies, along with expectations of declining demand for oil, could lead to a reduction of global oil refining capacities by up to 21% by 2035. This is stated in a study by Implementa, which was reviewed by Izvestia. According to experts, around 10% of such facilities have already closed worldwide over the past decade. Most of these closures occurred in China, Europe, and North America. What position does Russia occupy in this market and what awaits domestic refineries amid the global transformation of the industry — this material by Izvestia seeks to illuminate.
What Are the Prospects for Global Oil Refining
Over the past few decades, environmental and tax policies in the oil refining sector have undergone significant changes related to global environmental trends, the transition to sustainable development, and alterations in the global energy landscape. Against this backdrop, approximately 10% of oil refining capacities (9 million barrels per day) have already been reduced globally, with another 21% (18.4 million barrels per day) at risk of closure by 2035. This is highlighted in the Implementa study reviewed by Izvestia.
From 2015 to 2025, the highest closure rates were observed in Asia-Pacific countries (19%) and China (30%). Europe accounted for 20% of the overall reduction, while North America, the Middle East, and other nations faced reductions of 5% and 7%, respectively.
The study indicates that in China, from 2015 to 2018, closures primarily involved small low-tech refineries with a combined capacity of 1.8 million barrels per day. Additionally, experts cite the tightening of environmental and tax policies as contributing factors.
In Europe, in 2016, the La Mede refinery (153,000 barrels per day) was closed due to low efficiency. Three years later, the site was converted to produce biodiesel. In 2019, the American company Philadelphia Energy Solutions (330,000 barrels per day) went bankrupt. Subsequently, the site was repurposed for warehousing and distribution centers for non-fuel products.
Looking ahead, according to Implementa, the structure of oil refining capacity closures by region is expected to change significantly. By 2035, Europe could lose nearly half — 49% — of its capacities, or 6.5 million barrels per day. In China and other Asia-Pacific countries, 16% and 18% of refining capacity respectively will be closed, while the Middle East will lose 41% of its capacities, and North America will face a 7% reduction.
According to Ivan Timonin, project manager at Implementa, a total of 101 out of 420 refineries are at risk. The most vulnerable are old, small, and expensive refineries without deep processing and petrochemical integration.
How the Green Agenda Affects Oil Refining
According to Energy Monitor, by 2024, China is projected to lead in refinery capacity with almost 18.5 million barrels of oil per day. The United States and Russia ranked second and third with figures around 18.4 million and 6.7 million, respectively.
"Today, we are observing a tightening of environmental standards and tax legislation globally," says Ekaterina Kosareva, managing partner at VMT Consulting.
"In many countries, requirements regarding emissions, fuel quality, and environmental monitoring have intensified. Under the EU’s 'Green New Deal', the goal is to achieve carbon neutrality by 2050, which will significantly impact the oil and gas sector. Russia also has a strategy aimed at achieving net zero greenhouse gas emissions (climate neutrality) by 2050," the expert reminded.
Ivan Timonin points out that the reduction in global oil refining capacities is not primarily related to a sharp decline in the demand for oil products but is mainly due to the deteriorating economic efficiency of certain refineries.
"Several factors are exerting pressure: a slowdown in gasoline and diesel demand, the electrification of transport, increasing environmental and carbon costs, and competition from large modern complexes in Asia and the Middle East. China, which has long been a main driver of hydrocarbon demand, may reach its peak oil consumption as early as 2027–2030. At the same time, 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 noted.
Sergei Tereshkin, CEO of Open Oil Market, stated that in light of the slowing demand for oil, the introduction of new capacities in China will decelerate, while refinery capacities in Europe and North America will continue to decline.
"Overall, the industry will adapt to the changing market conditions: demand for aviation fuel, low-sulfur fuel oil, and gasoil for marine transport will continue to grow, while consumption of gasoline for vehicles is likely to plateau," Ivan Timonin concluded.
What Awaits Russian Refineries
In Russia, as of 2025, around 30 major refineries and approximately 80 mini-refineries are in operation. Their total capacity is estimated at 328 million tons of oil per year.
The country's energy strategy project until 2050 aims to maintain processing volumes while increasing the export of oil products. According to the target scenario, production is expected to reach about 275 million tons, with exports growing from 132 million tons in 2024 to 146 million tons by 2050.
The strategy's authors expect that this increase will occur through the transition of Russian motorists to gas fuel and other forms of eco-friendly transport. The depth of refinery processing is also expected to increase from 84.4% in 2024 to 95% by 2050.
According to Ivan Timonin, Russia operates under a different logic compared to Europe or China. For domestic refining, the main challenges involve not merely the energy transition but also sanctions, logistics, access to technology, and infrastructure resilience.
Additionally, Russian exports have already largely adapted to a new geography. The share of friendly countries in the export of Russian oil and gas condensate rose from 41% in 2021 to 96% in 2025, while for oil products, it increased from 18% to 80%, despite a physical volume decline from 133 million tons to 107 million tons.
"In the long term, demand is shifting particularly to countries outside the Western bloc: by 2040, they could account for around 62% of global oil consumption. Therefore, for Russia, the issue is not so much the mass closure of refineries as it is about the technological and economic resilience of the industry. Priorities include chemicalization, deep processing, digitalization, import substitution of critical technologies, and producing products with higher added value," Ivan Timonin emphasized.
The expert also noted a separate factor: the slower transformation of domestic demand.
"In Russia, gas fuel is developing faster than electric vehicles; however, the total share of cars running on alternative fuels is still less than 5%. This means that the domestic market for oil products will change more slowly than in Europe, but modernization of refineries remains necessary," he stated.
For Russia, maintaining its market niche as one of the largest suppliers of diesel fuel is crucial, according to Sergei Tereshkin. He believes this is a realistic goal since the electrification of freight transport will happen at a slower pace compared to passenger vehicles.
In Russia, from 2028, a "reverse excise tax on crude oil" mechanism has been implemented to encourage companies to modernize their refineries, Ekaterina Kosareva reminded.
"I would not rule out that low-tech mini-refineries, currently experiencing difficulties in selling their products both on foreign and domestic markets due to the pricing pressures from petrochemical monopolies, may close. However, modern oil refining complexes will continue to develop. Currently, there are at least two plants under development in the Far East," the expert noted.
In the West, she believes, the green agenda is being artificially hastened through legislative frameworks, which may prevent the market from developing organically and could lead to serious fuel crises in the future.
Source: Izvestia
