BAKU, Azerbaijan, July 3. From 2020 to 2022, European refiners had to shut down 610 kb/d of capacity, continuing the trend of closures in the region, Trend reports.
According to the International Energy Agency (IEA), between 2010 and 2019, a total of 2.3 mb/d of capacity was permanently shut down. Looking ahead, there are an additional 267,000 b/d of confirmed closures projected for the forecast period.
In 2022, European refineries faced significant challenges. Despite a strong margin environment that helped recover runs to pre-COVID-19 levels, war between Ukraine and Russia resulted in the loss of Russian crude supplies to UK and EU refineries. This forced a rapid adjustment in regional crude and feedstock flows. To compensate for the loss of Russian barrels, EU refineries increased imports of crude from the North Sea, the US, and North Africa.
Alongside the shift in crude slate, refiners dealt with higher costs for natural gas and participation in the EU's Emission Trading Scheme (ETS). The cost of a European Union Allowance (EUA) increased from 40 euros per Mt CO2 equivalent in January 2021 to nearly 100 euros per Mt CO2 in 1Q23.
Data from 2022 indicates that EU refining emissions reached their highest level since 2017, rising slightly faster than the increase in crude throughputs. This higher energy intensity can be attributed to the closure of simpler refining capacity and the production of a greater share of clean transportation fuels. Additionally, the allocation of free allowances, which help refiners compete globally, continued to decrease, covering only 65 percent of the sector's emissions in the previous year compared to 81 percent in 2020.
To address environmental concerns, the European Union has agreed to implement a Carbon Border Adjustment Mechanism and revise the EU ETS scheme by eliminating free allowances. The rate at which these allowances will decline annually will accelerate from the current 2.2 percent to 4.3 percent in 2024-27 and further to 4.4 percent for 2028-30.