The tightening of environmental and tax policies, combined with expectations of declining oil demand, could lead to a reduction of up to 21% in global refining capacity by 2035. This is stated in a study by Implenta, which was reviewed by Izvestia. According to experts, approximately 10% of such facilities have already closed in the last decade, primarily in China, Europe, and North America. This article examines Russia's position in this market and the future of domestic refineries amidst the global transformation of the industry.
What are the prospects for global oil refining?
Over the past decades, environmental and tax policies in the refining sector have undergone significant changes, largely in response to global environmental trends, the transition to sustainable development, and shifts in global energy. Against this backdrop, around 10% of refining capacity (9 million barrels per day) has already been eliminated, with another 21% (18.4 million barrels per day) at risk of closure by 2035, according to the research from Implenta, which was reviewed 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 study notes that between 2015 and 2018, China mainly closed small, low-tech refineries with a total capacity of 1.8 million barrels per day, primarily due to the tightening of environmental and tax policies.
In Europe, the La Mede refinery (153,000 barrels per day) was closed in 2016 due to low efficiency. Three years later, the site was repurposed for biodiesel production. In 2019, the American Philadelphia Energy Solutions refinery (330,000 barrels per day) went bankrupt, later transforming the facility into storage and distribution centers for non-fuel products.
Looking ahead, according to Implenta, the structure of refinery closures by region will change significantly. By 2035, Europe could lose nearly half (49%) of its capacities, or 6.5 million barrels. China and other Asia-Pacific countries may see a closure of 16% and 18% of their refining capacities, respectively, while the Middle East could lose 41% and North America 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 costly plants that lack deep processing and petrochemical integration.
How does the green agenda impact oil refining?
According to Energy Monitor, as of 2024, China is the leader in refinery capacity, with nearly 18.5 million barrels of oil per day. The U.S. and Russia occupy the second and third spots, with capacities of approximately 18.4 million and 6.7 million, respectively.
Ekaterina Kosareva, managing partner at VMT Consulting, states that there is currently a tightening of environmental standards and tax legislation worldwide.
"Many countries have strengthened requirements regarding emissions, fuel quality, and environmental monitoring. Under the EU’s 'Green New Deal,' the goal has been set to achieve carbon neutrality by 2050, which will significantly impact the oil and gas sector. Russia also has a strategy aimed at reaching net-zero greenhouse gas emissions by 2050," the expert noted.
According to Ivan Timonin, the reduction in global refining capacity is not primarily due to a sharp decrease in the demand for petroleum products but rather due to the declining economic efficiency of certain refineries.
"The pressures are being formed by several factors: slowing 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, which was long the primary driver of hydrocarbon demand growth, may reach its peak oil consumption between 2027 and 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," he added.
Sergey Tereshkin, CEO of Open Oil Market, stated that given the slowdown in oil demand growth, the introduction of new capacities in China will decelerate, while refining capabilities in Europe and North America will continue to diminish.
"Overall, the industry will adapt to changing market conditions; the demand for aviation fuel, as well as low-sulfur fuel oil and gas oil for marine transportation, will continue to grow, while gasoline consumption is likely to plateau," Ivan Timonin noted.
What awaits Russian refineries?
As of 2025, approximately 30 large refineries and around 80 mini-refineries operate in Russia, with a total capacity estimated at 328 million tons of oil per year.
The country's energy strategy through 2050 sets tasks to maintain processing volumes while increasing oil product exports. The targeted scenario suggests that production will amount to about 275 million tons, with shipments abroad growing from 132 million tons in 2024 to 146 million tons by 2050.
The strategy's authors believe this will occur due to a transition of Russian motorists to gas-engine fuel and other types of eco-friendly transportation. The depth of processing at refineries is also expected to increase from 84.4% in 2024 to 95% by 2050.
Ivan Timonin indicated that Russia is operating under a different logic compared to Europe or China. For domestic refining, the main challenges are not only the energy transition but also sanctions, logistics, access to technologies, and infrastructure resilience.
Meanwhile, Russian exports have already largely adapted to new geography. The share of friendly countries in exports of Russian oil and gas condensate rose from 41% in 2021 to 96% by 2025; for oil products, the share increased from 18% to 80%, although the physical volume of exports dropped from 133 million tons to 107 million tons.
"In the long term, demand is shifting, particularly 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 massive closures of refineries but rather about the technological and economic sustainability of the industry. Priorities should include chemicalization, deep processing, digitization, import substitution of critical technologies, and the production of higher value-added products," Ivan Timonin concluded.
A separate factor is the slower transformation of internal demand, the expert emphasized.
"In Russia, the development of gas-engine fuel is occurring faster than that of electric vehicles, yet the overall share of passenger cars using alternative fuel types remains below 5%. This indicates that the domestic market for oil products will evolve more slowly than in Europe, but this does not negate the need for refinery modernization," he said.
Sergey Tereshkin noted that it is essential for Russia to maintain its market niche as one of the largest suppliers of diesel fuel. He believes this is a realistic task overall, as the electrification of freight transport will progress more slowly than that of passenger vehicles.
Starting in 2028, Russia has implemented a "reverse excise tax on crude oil" mechanism, which incentivizes companies to modernize their refineries, Ekaterina Kosareva reminded.
"I wouldn't rule out that low-tech mini-refineries that currently face sales difficulties both in external markets and domestically due to price pressure from petrochemical monopolists might close. However, modern refining complexes will continue to develop. Currently, at least two plants are under development in the Far East," the expert noted.
In contrast, she believes that in the West, the green agenda is being artificially constrained by legislative timelines, preventing the market from developing organically, which could lead to serious fuel crises in the future.
Source: Izvestia
