European refineries must embrace biofuel and renewable energy production to remain competitive in the face of tightening climate legislation and a weakening long-term demand outlook for conventional oil products, delegates heard at the Argus Global Markets Conference.
Europe has lost around 400,000 b/d of refining capacity since early 2024. Five refineries have closed in the past two years, including three since March. High taxes, climate rules and smaller-scale sites are making European refineries less competitive than those in other regions.
Eni's 88,400 b/d Livorno refinery in Italy was among the closures, repurposed as a hydrotreated vegetable oil (HVO) plant — an example of how some European refiners are adapting.
Panellists cited the IMO's Emissions Control Areas, the EU's ReFuelEU aviation mandate, its recast Renewable Energy Directive (RED III) and its Carbon Border Adjustment Mechanism (CBAM) as key policies that will reduce oil product demand and weigh on refining margins.
Long-term forecasts for naphtha and diesel demand are particularly weak, panellists said, pointing to a shrinking petrochemical sector in the region, slower industrial activity and rising electric vehicle uptake.
Refiners in Europe must adapt to this "hostile climate" for fossil fuel production by "teaching an old refinery new tricks", said Lukasz Strupczewski, executive director of crude trading at Polish firm Orlen.
Co-processing biofuel feedstocks alongside crude oil is key to meeting mandates and keeping European plants competitive, he said.
European refiners must "plan for growth but anticipate decline at the same time", he added — referring to the need to expand biofuel output while preparing for reduced demand for conventional oil products under tightening regulation.
Grazvydas Bajoras, director at Swiss-based aviation fuel supplier iFuel, gave the example of used cooking oil (UCO) as a feedstock for producing HVO, HEFA-SPK — a type of sustainable aviation fuel (SAF) — and marine biodiesel.
Around 22 European refineries are currently co-processing biofuel feedstocks to produce HVO and/or HEFA-SPK, according to Argus tracking.
More are expected to adopt co-processing in the coming years.
Bajoras also encouraged refiners to develop hydrogen production at their plants, which can be combined with captured carbon molecules to make synthetic fuels such as e-SAF.
