Refinery Closures: What to Expect by 2035

While global oil demand is projected to grow in the near term, the future for many refineries worldwide is increasingly uncertain. According to Wood Mackenzie's Global Refinery Closure Outlook to 2035, nearly a quarter of today's refining capacity is at risk over the next decade. The study assessed 420 sites globally and identified 101 refineries, representing 18.4 million barrels per day (b/d) or 21% of current capacity, as vulnerable to closure.

Why Refineries Are Under Pressure

Margins and market shifts. Refining margins are expected to remain healthy into the early 2030s, but once oil demand peaks, particularly in developed economies, pressure will mount. Europe faces some of the steepest challenges as demand falls with the rise of electric vehicles, while high carbon costs further erode profitability.

• Lack of petrochemical integration. Standalone refineries, which do not have petrochemical units to create additional value, make up the majority of at-risk assets. Even some complex, deep-conversion facilities are vulnerable if they cannot offset emissions costs or adapt to shifting demand.
• Carbon pricing. Decarbonization is becoming a decisive factor. Refineries in regions with escalating carbon taxes, such as the EU, UK, and Canada, are under particular strain. Without investments in carbon capture, energy efficiency, or low-carbon technologies, many of these sites could become unprofitable as carbon costs climb.

The Role of Ownership

Refinery ownership also plays a key role in long-term survival. National oil companies (NOCs), often backed by governments, may continue operating marginal refineries even in low-profit environments. International oil companies (IOCs), by contrast, are more inclined to close or divest older, less competitive sites, focusing instead on efficient and lower-emission assets.

Regional Outlook

Europe - Home to 60% of the world's high-risk refineries, Europe is under the heaviest pressure due to falling demand and high carbon costs. Roughly half of its 5.1 million b/d of capacity is rated medium-risk.

China and Asia Pacific - Together, these regions account for about 30% of the world's low-risk capacity. Many refineries here are complex, integrated with petrochemicals, and positioned to weather long-term shifts better than their peers.

Middle East and Africa - Around 4.7 million b/d of capacity is at low or medium risk. In Africa, although all flagged sites are low-risk, they still represent nearly half of the continent's refining capacity.

North America - About 1.5 million b/d of capacity across eight sites in the U.S., Canada, and Mexico is considered medium or low risk. A lack of petrochemical integration makes these sites more vulnerable over time.

What This Means for the Industry

The study underscores a critical transition for the refining sector. While short-term profits remain strong, the longer-term picture is one of rationalization. Petrochemical integration, ownership structure, and the ability to adapt to carbon pricing will determine which refineries survive. By 2035, a significant portion of today's refining landscape may be reshaped, with closures concentrated in Europe and parts of Asia, while more advanced and integrated sites in the Asia Pacific and the Middle East stand to remain competitive.