Oil refineries across Europe will be forced to shut as the West abandons fossil fuels in the race to net zero, the boss of BP has said.
Murray Auchincloss said that older and smaller refineries will close or convert to biofuels as traditional oil refining is rendered unprofitable by a combination of surging fuel taxes and falling demand from drivers forced to go electric.
He was speaking as BP unveiled a $5.5bn (£4.3bn) profit for the first half of the year.
Mr Auchincloss said: “As the world transitions to electrification of the car fleet, and electrification or hydrogenation of the trucking fleet, there’ll be less need for diesel and gasoline.
“So I would expect the least efficient refineries, which are the smallest, oldest around the world, to gradually close down as the world transitions over the next 10 to 30 years.”
Closures threaten to leave thousands of oil and gas workers out of a job and Mr Auchincloss’s comments come as unions plan a march on Saturday in protest at the closure of Grangemouth Refinery in Scotland.
The facility, which is owned by Ineos, employs 500 people but is scheduled to shut early next year.
Unite general secretary Sharon Graham said: “Unite is fighting hard for the futures of workers in Grangemouth, to extend the life of the refinery and to secure commensurate jobs for them in new low-carbon projects at the plant.
“We cannot allow oil and gas workers to become the coal miners of our generation.”
BP has four refineries in Europe, three of which are already planned for conversion to produce biofuels including sustainable aviation fuel (SAF).
Lingen in Germany is moving away from crude oil and has started processing cooking oil into aviation fuel. BP’s other German refinery, in Gelsenkirchen, is undergoing a similar conversion – although this is currently on hold after costing the company nearly $1bn so far.
European refineries are mostly older, smaller and less efficient than their competitors in the US, Asia and Middle East. They also increasingly face tougher environmental regulations as well as carbon taxes.
Data from Fuels Europe, the industry trade body, shows that refining capacity across the EU, plus the UK, Switzerland and Norway, is already declining. Capacity has fallen from 781m tonnes a year in 2009 to 677m tonnes now.
It means Europe has about 15pc of global refining capacity – well behind the US with 21pc or the Asia-Pacific region with 36pc.
Mr Auchincloss said the regulatory pressures in Europe were pushing his company towards greener fuels.
He said: “There are heavy mandates in Europe for two things. One is carbon taxes, where you must reduce the carbon content or pay heavy taxes. So we’re incentivised to move to green or blue hydrogen to decrease the risk of increased taxes.
“Second, there are mandates in place to create more sustainable aviation fuel for airlines. Those go from 2pc from 2025 to 6pc from 2030 and 20pc after 2035. That’s a huge incentive to create these biofuel plants.”
Mr Auchincloss’s comments came as the company reported profits of $2.8bn for the second quarter of 2024, with strong income from oil prices offset by weak results in its refinery operations. That compared with a $2.7bn profit in the previous quarter and $2.6bn a year earlier.
BP is based in the UK but makes almost all its profits through overseas operations. It has four active oil and gas operations in the North Sea, but all are small by global standards.
Asked for his reaction to Chancellor Rachel Reeves’ decision on Monday to raise taxes on oil and gas production profits from 75pc to 78pc and strip the industry of a range of tax allowances, Mr Auchincloss said existing operations would continue but BP had no expansion plans.
He said: “Labour policy says oil and gas production in the North Sea will be with us for decades to come … They launched a consultation process with the sector last night and we’ll be engaged deeply with them on that.”
Mr Auchincloss plans to sharply expand BP’s fossil fuel interests outside Europe. That includes approving development of the Kaskida oilfield in the US Gulf of Mexico, discovered in 2006 beneath a mile of water and six miles of rock. A drilling rig called Deepwater Horizon discovered the field, but it was at such high temperatures and pressures that it has taken nearly two decades to develop the technology to exploit it.
In 2010 the same rig, Deepwater Horizon, was at the centre of one of the oil industry’s worst ever disasters when it suffered a blowout caused by the high oil pressures in the same region. The resulting explosion killed 11 crewmen, ignited a fireball visible from 40 miles away and caused widespread pollution.
The Kaskida oil field is at even higher pressures, but in a statement BP said it was confident they could be controlled.
It said: “Kaskida is in a prime location … It will be BP’s first development in the Gulf of Mexico to produce from reservoirs that will require well equipment with a pressure rating of up to 20,000 pounds per square inch. This project unlocks the potential future development of 10bn barrels of oil.”
Source Agencies
