While closures accelerate in mature markets, modular strategies, low-carbon investments, and petrochemical integration are reshaping industry survival and positioning for 2030 and beyond

Global refining stands at one of its most transformative junctures since the industry’s inception. As the world races to meet climate targets and transition to low-carbon energy, refineries face structural upheaval.

Demand is plateauing, regulations are tightening, and the capital intensity of the sector leaves many players vulnerable.

Yet opportunities exist, particularly for those willing to adapt, embrace technology, and leverage integration with petrochemicals and alternative fuels.

The decade leading up to 2030 is likely to determine not only which refineries survive, but also how they redefine their role within an evolving energy ecosystem.

Refining’s predicament is further complicated by shifting geopolitics and energy security imperatives. Russia’s invasion of Ukraine in 2022 reshaped global flows of crude and refined products, triggering a surge in European dependence on Middle Eastern and US suppliers. That disruption continues to ripple through markets today.

The European Union (EU), in particular, faces a structural shortage of diesel due to Russian import bans, raising refining premiums and forcing governments to maintain strategic fuel stocks.

In Asia, meanwhile, growing domestic demand and state-backed investment allow countries like China and India to exert greater influence over regional supply chains.

Analysts suggest this new multipolar dynamic will persist, with refined product trade routes becoming more fragmented and politically sensitive than ever.

GLOBAL PRESSURES & REGIONAL DIVERGENCE

The outlook for global refining is mixed and uneven. According to industry analyses, global demand for refined products is expected to peak around the mid-2020s, with the International Energy Agency (IEA) projecting consumption at approximately 86 million barrels per day (bpd) by 2027, only marginally above current levels.

While petrochemicals and aviation fuel are forecast to sustain modest growth, traditional transport fuels are set to decline steadily.

This trend is exacerbated by electrification of mobility, improved fuel efficiency, and policy-driven decarbonisation efforts.

As demand plateaus, refining margins have come under severe pressure. In 2024, downstream earnings halved compared with the previous year, and were nearly 60 per cent below 2022 highs, according to the Boston Consulting Group (BCG).

Although short-term relief arrived in 2025 with margins briefly reaching $8.37 per barrel, this pales in comparison to the record highs of 2022 when margins climbed above $30 per barrel.

Analysts suggest such rebounds are cyclical rather than structural, highlighting the sector’s long-term profitability challenges.

At the same time, environmental, social, and governance (ESG) pressures are intensifying. Investors are becoming more selective, with several large institutional funds divesting from companies that do not demonstrate credible low-carbon transition plans.

This capital flight increases financing costs for traditional refiners while directing funding toward biofuels, hydrogen, and advanced petrochemicals.

In parallel, public scrutiny over air quality and carbon emissions has pushed regulators to consider tighter sulphur limits, methane monitoring requirements, and even mandatory carbon capture integration for large plants.

These shifts suggest that the refining industry’s ability to attract investment will increasingly depend on its environmental credentials, not just profitability.

Geographic divergence further complicates the outlook. Europe is witnessing a wave of closures, accelerated by stringent carbon taxes, high operating costs, and policy pressures.

The UK exemplifies this trajectory: the Grangemouth refinery, a staple of Scotland’s industrial landscape, has announced closure, leaving the country with only five operational plants.

In contrast, regions like Asia and the Middle East are expanding capacity and investing in integration, seizing opportunities to supply both domestic and export markets.

Opec+ petroleum product exports hit a record 5.07 million bpd in 2024, underlining the competitive advantage of low-cost refiners in the Gulf.

India provides another telling example. Ambitious plans once called for a 69 per cent capacity expansion by 2025, but actual growth has been a mere 5 per cent over seven years.

This shortfall has increased reliance on imports while raising concerns about energy security.

Similarly, Indonesia is pursuing smaller, modular refineries, with 17 already proposed, to accelerate domestic capacity growth.

While quicker to deploy, these plants may struggle with economies of scale, raising doubts about long-term viability.

Meanwhile, US refining remains largely stagnant, with capacity expansions under 1 per cent in 2025, reflecting cautious incrementalism.

DECARBONISATION, DIGITALISATION & PETROCHEMICALS

Faced with tightening economics and climate scrutiny, refiners are experimenting with new strategies.

Decarbonisation remains central to long-term survival, with some operators moving aggressively into hydrogen, biofuels, and carbon capture.

The Stanlow refinery in the UK is pursuing a £2.25 billion ($3 billion) investment programme that includes hydrogen hubs and carbon capture facilities, aiming for a 95 per cent emissions reduction by 2030.

In Scotland, proposals to convert the closing Grangemouth site into a biofuels complex underscore a broader industry trend: Re-purposing legacy assets into hubs for renewable fuels and green hydrogen.

Integration with petrochemicals is another strategic lifeline. Petrochemical demand, driven by plastics and materials essential for construction, packaging, and technology, remains on an upward trajectory despite sustainability concerns.

Several Middle Eastern refineries are upgrading facilities to directly link refining with chemical production, maximising margins and creating more resilient product portfolios.

This aligns with findings from Rystad Energy’s ‘The Future of Refining: Global Shifts and Strategic Outlook Toward 2030’ report, which emphasises petrochemicals as a cornerstone of refining’s future viability.

Technology also plays a growing role in enabling flexibility and efficiency. Digitalisation, automation, and predictive analytics are being deployed to modernise ageing assets.

A recent pilot involving IoT sensors installed across petrochemical facilities demonstrated notable improvements in efficiency, real-time monitoring, and maintenance, underscoring the potential for operational resilience.

These advances help operators extend the life of existing infrastructure while aligning with decarbonisation requirements.

Another crucial frontier is sustainable aviation fuel (SAF). With international aviation committed to net-zero targets by 2050, demand for SAF is set to rise dramatically.

Refineries are increasingly retrofitting units to process waste oils, agricultural residues, and synthetic feedstocks into jet fuel.

European refiners, under regulatory pressure from mandates such as ReFuelEU, are expected to lead early deployment, while Asian and Middle Eastern players view SAF as a premium export opportunity.

Analysts predict that by 2030, SAF could account for up to 10 per cent of global jet fuel consumption, creating a new revenue stream for refiners willing to pivot early.

Meanwhile, national oil companies, particularly in Asia and the Middle East, are leading aggressive expansions.

Although emissions intensity per unit of output has remained stable, absolute emissions are climbing due to capacity growth.

This raises questions about the global carbon budget, particularly as developed economies shutter refineries while developing nations build new ones.

Policymakers will increasingly need to reconcile energy security, industrial development, and decarbonisation in ways that may diverge starkly across regions.

From a strategic standpoint, the industry is fragmenting into three broad camps:

• Refiners in mature markets transitioning toward low-carbon models or closures;

• Those in emerging markets aggressively building capacity and petrochemical integration;

• And a smaller group embracing modular and digital innovation as a bridge to the future.

The sector’s diversity of approaches suggests there is no single path forward, only a spectrum of adaptation strategies shaped by local policy, resource endowment, and market dynamics.

OUTLOOK TO 2030: RESHAPING THE INDUSTRY

Looking ahead, refining in 2030 will bear little resemblance to its current form. Mature-market operators who fail to decarbonise or diversify risk permanent obsolescence.

Facilities that succeed in transforming into low-carbon hubs or petrochemical complexes may not only survive but thrive.

In growth markets, refiners will likely continue investing in capacity, though questions remain over long-term demand sustainability and exposure to climate policy risks.

Modular and distributed models, while unproven at scale, may offer attractive options for nations with constrained capital or pressing energy security needs.

Importantly, the balance of power is shifting toward Asia and the Middle East, reinforcing a long-term trend of refining centre-of-gravity moving eastward.

By 2030, these regions are expected to dominate both refining throughput and investment in petrochemical integration.

Western refiners, unless transformed, risk marginalisation in the global supply chain.

Ultimately, the refining industry is not disappearing but transforming under pressure. Its future will hinge on adaptability, the ability to reduce emissions, embrace technology, and pivot into growing segments such as sustainable aviation fuels and advanced petrochemicals.

In an energy system that is increasingly fragmented and decarbonised, refineries that adapt can remain vital cogs in industrial supply chains.

Those that do not may become stranded assets in a world accelerating towards net zero.

By Abdulaziz Khattak