Refiners increase divestments, closures as part of net-zero strategy

While most global refiners in 2024 maintained and even expanded investments in new projects aimed at preparing their portfolios for a low-carbon future in line with the global energy transition, operators' net-zero strategies increasingly included decisions to rationalize their share of conventional crude processing capacities through ongoing divestments, site transformations, and permanent closures.

This year’s worldwide refining report highlights a series of decisions operators announced by yearend to sell off, undertake conventional-to-renewables conversions, or altogether shutter traditional refining platforms as part of  efforts to remain competitive while meeting their respective commitments for achieving net-zero carbon emissions by 2050 or sooner.

Europe, UK changes

Most of the planned changes to ownership and volume of conventional refining capacity over the next few years will happen in the European Union (EU) and UK.

While the EU managed to dodge official plans for outright refinery closures, the UK will lose at least one refinery in the near term.

In Septemember, Petroineos Refining Ltd. (PRL)—a joint venture of INEOS Group’s Ineos Investments (Jersey) Ltd. (50.1%) and China National Petroleum Corp.’s PetroChina Co. Ltd. (PetroChina) subsidiary PetroChina International (London) Co. Ltd. (49.9%)—confirmed it will permanently shutter Petroineos Manufacturing Scotland Ltd.’s 150,000-b/d Grangemouth refinery complex on the Firth of Forth in Scotland (Fig. 1).

PRL and INEOS said they intend to cease all conventional crude processing operations at the refinery during second-quarter 2025 and transition the site into a finished fuels import terminal and distribution hub. The proposed refinery closure and transition plan directly results from a collision of global market pressures and the energy transition, the combination of which has left the 1924-built refinery unable to economically compete with more modern and efficient sites in the Middle East, Asia Pacific, and Africa, according to the parties.

During the last decade, annual costs to execute core maintenance and repairs required to retain the refinery’s operating license have consistently exceeded earnings, and a probable ban on new gasoline and diesel cars to take effect in the coming years will only further slash demand for conventional products, PRL added.

The Grangemouth site is anticipated to be ready to operate as a national distribution hub for finished fuels in second-quarter 2025.

In response to PRL’s confirmation of its decision to proceed with the site’s transformation plan, INEOS said its separate businesses at Grangemouth—including INEOS O&P UK’s Grangemouth petrochemical plants and INEOS FPS’s processing and other land-based infrastructure for its Forties pipeline system—will continue as normal, with both businesses to be “largely unaffected” by the refinery’s closure.

During preparation of the site’s transition plan, PRL said it has also simultaneously been working with the UK and Scottish governments to evaluate options for Grangemouth to become a low-carbon fuels manufacturing hub.

Already underway, the initial feasibility study for the proposed Project Willow is assessing various low-carbon opportunities from technical, economic, commercial, regulatory, environment, community, and skills perspectives. Funded equally by the Scottish and UK governments, the study is being managed by Ernst & Young Global Ltd. with technical, engineering, and commercial support provided by Petroineos, INEOS, and PetroChina, PRL said.
With the initial research phase already completed—including shortlisted options for potential manufacturing of SAF, low-carbon hydrogen, eFuels, and other possible low-carbon products—PRL confirmed the project team has entered the second phase of research consisting of a detailed assessment for viability of each shortlisted option. By spring 2025, the company said it expects the project team to have identified commercially viable opportunities to develop low-carbon fuels at the former refinery that—in addition to underpinning government commitments to a net zero transition—would maximize local employment and contribute to long-term sustainable energy and fuel security in Scotland and the UK.

In the EU, Esso Societe Anonyme Francaise (SAF)—a majority owned subsidiary of ExxonMobil Corp. (82.89%)— entered a formal deal in early August for the sale of its 140,000-b/sd (133,000-b/d) Fos-sur-Mer integrated refinery in the Bouches-du-Rhône region of southern France’s Provence-Alpes-Côte d'Azur (Fig. 2).

Esso SAF agreed to sell its refining and logistics operations in southern France, including the Fos-sur-Mer refinery and Toulouse (Fondeyre) and Villette de Vienne terminals, to Rhône Energies, a consortium of Entara LLC and Trafigura Pte Ltd. in a transaction that Trafigura confirmed was completed Nov. 1.

The divestment came as part of Esso's long-term strategy in France aimed at maintaining the competitiveness of its operations. Esso SAF previously said that post-sale it would continue to guarantee continuity of supply fuels and specialty products such as lubricants, base oils, and bitumen to its customers in the south of France from the operator’s 244,000-b/sd (231,800 b/cd) Notre-Dame-de-Gravenchon refinery in Port-Jérôme-sur-Seine, Normandy, in northern France.

Alongside proposed investments in personnel and process safety, Rhône Energies has committed to investing in both sustainability measures at the refinery to reduce its carbon intensity and growth projects to enable further co-processing of biogenic feedstocks for production of renewable fuels.

As part of the deal—financial details of which remain confidential—Trafigura entered a minimum 10-year crude oil supply and product offtake agreement, including ownership of crude oil and product stocks in tank, to ensure the refinery has a secure supply of on-demand feedstock at competitive costs, as well as a reliable off-taker of refined products destined for the domestic market.

Alongside the Fos-sur-Mer divestment, Esso SAF also confirmed that the requisite information and consultation process, as well as an internal restructuring plan, were under way for the proposed permanent shutdown of ExxonMobil’s 100%-owned ExxonMobil Chemical France (EMCF) primary chemical production unit at its Gravenchon plant, co-located near Esso SAF’s Gravenchon refinery in Port-Jérôme-sur-Seine.

While it will not impact refining activities at Gravenchon, ExxonMobil said EMCF’s planned shutdown of the Gravenchon steam cracker—which produces 400,000 tonnes/year (tpy) of ethylene—will include closure of related derivatives units and logistics installations as part of the company’s plan to maintain the competitiveness of its European operations. ExxonMobil also said it was determining ways to find new uses for the land made available following remediation of the manufacturing site.

Elsewhere in the region, Equinor ASA in February 2024 let a contract to Aker Solutions ASA to execute a feasibility study for the proposed transformation of subsidiary Equinor Refining AS’ 226,000-b/d refinery at Mongstad, on Norway’s western coast, into a low-carbon industrial cluster equipped for production of blue hydrogen and sustainable aviation fuel (SAF) (Fig. 3).

Aimed at identifying opportunities for reducing carbon dioxide (CO2) emissions from the existing refinery in line with Equinor’s broader energy transition plan, the feasibility study was to investigate options for both proposed and existing installations at the site, including integration of brownfield, greenfield, and third-party technologies.

The scope of the study for the planned conversion—formally known as the Mongstad industrial transformation project (MITP)—specifically was to outline pathways for developing:

• A grassroots plant that produces blue hydrogen from natural and refinery fuel gas.
• Carbon capture and export.
• A new plant able to produce SAF from municipal solid waste at an emissions-reduction rate of more than 70%.

The proposed MITP follows Equinor’s 2022 completion of a project to replace the Mongstad refinery’s combined heat and power plant with a new heater that has resulted in an estimated net-emissions reduction of 250,000 tpy.

Equinor said it remains on track to achieve its 2030 goal of reducing overall CO₂ emissions from its operations by more than 50%, on its journey to achieving net-zero emissions by 2050. Reduced emissions amid growth of its renewables, decarbonized energy, and carbon capture and sequestration (CCS) businesses also underpin the company’s ambition to reduce net-carbon intensity by 20% by 2030 and 40% by 2035.

In a project description on its website, Equinor said the proposed MITP is a measure to reduce risks posed to what is Norway’s only refinery stemming from the increased costs of high-CO₂ emissions at the site. Ongoing studies for the MITP have evaluated several different ways to reduce CO₂ emissions, including customizing production according to future market requirements and exploiting opportunities for CCS. Equinor previously confirmed one option under consideration is conversion of the refinery's fuel gas to low-carbon blue hydrogen and CO₂, with hydrogen replacing fuel gas to power refining operations and CO₂ transported to storage at Smeaheia in the North Sea. The clean hydrogen specifically would be used to produce SAF at the site, the operator said.

Equinor has yet to disclose an official timeline for the MITP, nor has it revealed details regarding the future of crude oil processing at Mongstad.

Aker Solutions, however, confirmed an additional award from Equinor in April for delivery of project management, engineering, procurement, construction, installation, and commissioning on a project to upgrade the Mongstad refinery’s wastewater treatment plant as part of the operator’s program to reduce the site’s environmental impact. Already under way, the wastewater treatment upgrading project is scheduled to be completed fourth-quarter 2026.
While conventional processing capacity remained the primary target of rationalization efforts, renewable plans also suffered a loss by yearend.

In July 2024, Shell PLC subsidiary Shell Nederland Raffinaderij BV suspended construction activities on a proposed 820,000-tpy biofuels plant that had already begun construction at the Shell Energy and Chemicals Park Rotterdam, the Netherlands, formerly known as the Pernis refinery. On-site construction works for the biofuels plant were “temporarily pause[d]…to address project delivery and ensure future competitiveness given current market conditions,” the operator and its parent company said.

In the wake of its decision to suspend works on the Rotterdam biofuels plant, Shell has undertaken a project-impairment review, with additional information regarding the project’s status and timelines yet to be revealed.

Despite the renewable project’s indefinite suspension, however, Shell reiterated its ongoing pledge to local and global decarbonization efforts, with plans in place to invest $10-15 billion across 2023-25 to support the development of low-carbon energy solutions including e-mobility, low-carbon fuels, renewable power generation, hydrogen, and carbon capture and storage.

Approved for final investment in September 2021 for proposed start of production in 2024, the Rotterdam biofuels plant was to produce SAF and renewable diesel made from waste, producing enough renewable diesel to avoid 2.8-million tpy of CO₂ emissions, or the equivalent of taking more than 1 million European cars off the roads. A range of certified sustainable vegetable oils, such as rapeseed, was to supplement the waste feedstocks until additional sustainable advanced feedstocks became more widely available.

SAF was to make up more than half of the proposed plant’s production, the operator said.
A major component of the project was to involve construction of new hydroprocessed esters and fatty acids (HEFA) plant that would be vital to the manufacturing site’s path to net zero as well as Shell’s transformation as part of the energy transition.

On first announcing the project, Shell said it also planned to capture carbon emissions from the plant’s manufacturing process and store them in the empty P18-2 gas field beneath the North Sea via the Port of Rotterdam CO₂ Transport Hub and Offshore Storage (Porthos) project.
Shell’s revelation of the project’s suspension follows the company’s accelerated program of divesting or transforming its downstream operations, including subsidiary Shell Deutschland Oil GMBH’s confirmation in January 2024 that it will repurpose an existing hydrocracker to production of base oils—as well as eliminate crude processing entirely by 2025—at its 140,000-b/d refinery at Wesseling, Germany, which together with the Godorf refinery near Cologne-Godorf, form its 339,000-b/sd integrated Rheinland energy and chemicals park, Germany’s largest (Fig. 4).

Previously committed to achieving net-zero emissions by 2050, Shell has since backed off any guarantees of its ability to fully decarbonize its operations by the global target deadline, informing investors that—based on the current economic environment and the operator’s 10-year planning period that does not yet include 2050—if society is not net-zero in 2050, there would be “significant risk that Shell may not meet this [2050] target.”

Upon a receiving a late-2024 favorable ruling by The Hague Court of Appeal overturning a May 2021 lower court verdict that would have required the operator to reduce its reported global CO₂ emissions under Scopes 1, 2 and 3 by at least 45% net by the end of 2030 compared to 2019 levels, the operator said on Nov. 12 that its goal remained to become a net-zero energy company by 2050, which included halving emissions for its own operations by 2030 from 2016 levels.

Asia Pacific divestment

Shell additionally announced plans in 2024 to relieve its portfolio of subsidiary Shell Singapore Pte. Ltd.’s (SSPL) conventional refining capacity in the Asia Pacific.

In May, the company entered a deal to sell the entirety of its interest in SSPL’s integrated refining and petrochemical operations in Singapore as part of the parent company’s broader attempt to achieve net-zero emissions across its global operations by 2050.

Under the sales and purchase agreement, SSPL will transfer 100% of its ownership in Shell Singapore Energy Park Pte. Ltd.’s dual-site Singapore energy and chemicals park (SECP) on Bukom Island and Jurong Island to CAPGC Pte. Ltd., a joint venture of Indonesia-based PT Chandra Asri Pacific Tbk (Chandra Asri) subsidiary Chandra Asri Capital Pte. Ltd. (CACPL; 80%) and Glencore PLC’s Glencore Asian Holdings Pte. Ltd. (GAHPL; 20%).

Upon completion of the proposed deal, CAPGC—established in Singapore by CACPL and GAHPL on Apr. 23, 2024—will become owner and operator of SSPL’s existing manufacturing assets at the SECP, including a 237,000-b/sd refinery and integrated 1.161-million tpy ethylene cracker on Pulau Bukom, as well as SSPL’s production on Jurong Island of styrene monomer, propylene oxide, high-purity ethylene oxide, monopropylene glycol (MEG), polyols, ethoxylates, and monoethylene glycols, Chandra Asri said.

In addition to physical manufacturing assets, CAPGC would take over SSPL’s existing commercial contracts as well as associated infrastructure at the site, including jetties, storage tanks, and pipelines.

The proposed acquisition of the SECP comes as part of a joint plan by Chandra Asri and Glencore to remain competitive amid the energy transition by leveraging the integrated site’s strategic location and production capabilities to provide an array of fuels and petrochemical products to growing Southeast Asian markets, according to the partners.

Based upon its shareholding, Chandra Asri told investors the acquisition also would allow Indonesia access to production to help make up for existing supply shortfalls in the region by providing an additional:

• 34,000 b/d of gasoline.
• 23,000 b/d of bitumen.
• 6,000 b/d of jet fuel.
• 65,000 tpy of ethylene.
• 45,000 tpy of propylene.
• 370,000 tpy of MEG.
• 238,000 tpy of polyols.

Following closing of the proposed transaction—which, pending regulatory approval, is scheduled to occur by yearend 2024 or early 2025—CAPGC said it would retain all of SECP’s current staff.

US major shutdown

While US operators continued a program of rapidly advancing grassroots and conventional-to-renewables projects for production of low-carbon fuels, one operator revealed plans for the permanent closure of a major US West Coast refinery.

In mid-October 2024, Phillips 66 Co. announced it will permanently cease conventional crude oil processing operations by yearend 2025 at its 138,700-b/d dual-sited refinery in Los Angeles, Calif., amid the operator’s determination that market conditions will prevent the long-term viability and competitiveness of the manufacturing site (Fig. 5).

“With the long-term sustainability of our Los Angeles refinery uncertain and affected by market dynamics, we are working with leading land development firms to evaluate the future use of our unique and strategically located properties near the Port of Los Angeles,” Mark Lashier, Phillips 66 chairman and chief executive officer said.

Despite the pending closure—which is currently scheduled for completion by yearend 2025—Phillips 66 said it remains committed to serving California and will continue to take the necessary steps to meet ongoing commercial and consumer demand for fuels within the state.
Citing and confirming its support for analysis from the California Energy Commission (CEC) showing the critical necessity for expanding regional supply capabilities, Phillips 66 said it will work with the state to maintain current supply and potentially increase it to meet consumer needs.

In addition to supplying gasoline from its own refining network—including renewable diesel and SAF from its recently commissioned Rodeo Renewable Energy Complex (RREC) in the San Francisco Bay area—the company confirmed it will also secure supplies for regional markets from third-party sources.

In the meantime, Phillips 66 said it has engaged real estate-development firms Catellus Development Corp. and Deca Companies LLC to evaluate potential future uses of the combined 650-acre Los Angeles sites—including the 235-acre Carson, Calif., location that processes crude oil and the pipeline-linked 424-acre Wilmington, Calif., site where intermediate products delivered from Carson are upgraded into finished products—via a process in which Phillips 66 will serve in an advisory role in helping advance potential commercial development options.

Lashier said the two sites offer an opportunity to create a transformational project that can support the environment, generate economic development, create jobs, and improve the region’s critical infrastructure.

While the operator made no mention of any plan for its own use of the soon-to-be mothballed Los Angeles operations, Phillips 66 had achieved full-capacity targets at the RREC in June 2024 by increasing combined production rates of renewable diesel and SAF to about 50,000 b/d (800 million gal/year).

Whether intended or not, the timing of Phillip 66’s announcement of the proposed Los Angeles refinery closure followed California Gov. Gavin Newsom’s Oct. 14 signing of legislation aimed at making the state’s oil refiners manage California’s gasoline supplies more effectively to prevent price spikes at the pump.

Known as Assembly Bill No. 1, the legislation provides the CEC more tools for requiring petroleum refiners to backfill supplies and plan for maintenance downtime as a means of helping prevent gas-price spikes like those that cost Californians upwards of $2 billion in 2023, according to the bill.

Introduced in early September in response to Newsom’s late-August convening of the state’s legislature into special session “to take on Big Oil’s gas-price spikes,” the new legislation allows the state to require that refiners maintain a minimum inventory of fuel to avoid supply shortages that “create higher gasoline prices for consumers and higher profits for the industry,” the governor’s office said.

“Gas price spikes are profit spikes for Big Oil, and California won’t stand by as families get gouged,” Newsom said in a Sept. 3 release.

Further amendments to the bill underscore workforce protections, emphasizing the need for any regulations adopted by the CEC to protect the health and safety of employees, local communities, and the public. These include preserving existing standards and rules that protect refinery workers, such as rules granting them authority to call for emergency refinery shutdowns and maintenance when needed for safety.