The litany of Europe’s refineries are facing calls to modernize operations as fuel consumption declines globally, led by the wave of new electric vehicles and AI data centers across the world. The world has been grappling with the reality that the conventional oil and gas sectors are coming to a climactic end in the near future. As demand for conventional energy production declines due to decarbonization goals and an increase in renewable energy production, Europe’s refineries have been urged by industry experts to modernize operations to integrate the renewable energy sector or face a grim future.
The world is entering a new phase that calls for aging energy infrastructure to adapt or die
The entire planet has been consumed by the calls for a more diversified energy market that can ensure a more integrated energy supply that does not rely on one specific energy generation method. For far too long, the world has relied on coal and gas to meet energy needs, which has devastated the environment.
At the Argus Global Markets Conference, delegates contemplated the best methods to modernize the European energy market, with aging refineries being the major sticking point. It has been stated by industry insiders that European refineries need to embrace biofuel and renewable energy production to remain competitive in the face of a litany of hurdles in the sector.
Since early 2024, Europe has lost around 400,000 b/d of refining capacity and has seen five refineries closed in the past two years. March saw three such closures of refineries in Europe, with Eni’s 88,400 b/d Livorno refinery in Italy being repurposed as a hydrotreated vegetable oil (HVO) plant.
Argus Global Markets Conference identified factors influencing the closing of European refineries
While some in the energy industry have welcomed the increased reliance on renewable energy, others in the market have lamented a future without gas and coal. Industry panelists at the Argus Global Markets Conference have noted several mitigating factors that have affected the recent closures, including but not limited to:
- IMO’s Emissions Control Areas
- The European Union’s ReFuelEU aviation mandate
- The EU’s recast Renewable Energy Directive (RED III)
- The EU’s Carbon Border Adjustment Mechanism (CBAM)
These key factors will reduce oil product demand and weigh in on refining margins on the European continent. European energy stakeholders have made several statements that outline the issues faced by the sector.
“Refiners in Europe must adapt to this “hostile climate” for fossil fuel production by “teaching an old refinery new tricks. Co-processing biofuel feedstocks alongside crude oil is key to meeting mandates and keeping European plants competitive” – Lukasz Strupczewski, executive director of crude trading at Polish firm Orlen
As nations outside the European Union see billions of dollars of new investments coming their way, the European energy sector has been urged to heed the warnings coming from industry experts and develop innovative solutions to the potential crisis at hand.
Industry stakeholders have made several suggestions to adapt the European refineries network
One such stakeholder is Grazvydas Bajoras, director at Swiss-based aviation fuel supplier iFuel. He recently stated that an example of how European refineries can adapt to the new market is by using cooking oil (UCO) as a feedstock for producing HVO, HEFA-SPK – a type of sustainable aviation fuel.
This would extend the lifecycle of the network of European refineries. Saudi Arabia has recently outlined a strategic expansion for refining, which proves that the modernization of aging refineries is possible. Europe will need to contemplate the most pragmatic method to alter the outlook for its refineries if its plans to remain a cornerstone of the international energy market for many more years to come.
