By Aneel Bhandari, Principal Industry Consultant, Octave
“Europe’s refineries helped save your summer holiday,” the FT recently wrote, in a rare tribute to one of Europe’s critical infrastructures. The continent’s plants went into overdrive to lift jet fuel output, which cut the volumes Europe had to import during the shortages and price spikes caused by the current conflict in the Middle East.
As the conflict drags on, the period also confirms a lesson: Europe cannot claim strategic independence while it imports so much of what keeps its travel industry running.
An opportunity to seize on
In a sector whose coverage usually runs to news of site closures, the conflict has been kind to refiners in the short term. Margins soared as damaged Gulf and Russian capacity and the near-closure of the Strait of Hormuz stripped several million barrels a day from global supply. BP’s refining indicator margin reached $30 a barrel in the second quarter, up from $12 a year earlier.
The long-run direction has not changed: of 101 sites worldwide flagged at risk of closure by 2035, Europe and China hold every high-risk asset between them, and Europe carries more than 60 per cent of that capacity. Falling transport fuel demand, industrial gas and electricity prices two to four times higher than the rest of the world and a fleet of catalytic crackers exposed to weakening petrol margins all point one way.
However, the temporary premium could be what the sector needs to transform, if it invests decisively to strengthen resilience and diversify production. Wood Mackenzie now expects margins to hold through the end of the decade, helped by thin spare capacity and a light pipeline of new projects.
Digitisation as the bedrock
Closure is not fate: it reflects complexity, emissions exposure and how much a site spends on adapting. Plants which pair petrochemical integration with a credible decarbonisation plan fare markedly better than standalone hydroskimmers with no strategy to speak of. The likely survivors are not the biggest, but the ones which can change what they make and how they make it.
Flexibility here is the operative word. When a refinery has to lift jet fuel output by 30 per cent in a matter of weeks, it cannot simply turn a dial. Engineers reassess pipelines, reactors and drums, run safety simulations and rebalance crude sourcing to free the right feedstocks. That reconfiguration depends on knowing a plant’s real operating envelope rather than its design specifications from twenty years ago.
Digitisation makes this possible at scale. More operators across the continent now model how a change in crude slate ripples through a whole site before a single barrel is committed, which compresses months of trial runs into days. Connected-worker platforms swap paper procedures and radio checks for live digital logs, and the lag between a control-room decision and its execution shrinks – a strategy that has proved particularly impactful for Crossbridge Energy in Denmark, using Octave Tempo.
The remaining assets are also ageing, and years of thin investment are now showing up in operations. Unplanned downtime is creeping up, much of it avoidable with better data and analytics, and because downtime is so costly, even short disruptions can quickly become serious operational and financial problems. In Europe, resilience is in large part about keeping ageing systems running reliably under growing pressure.
Building resilience and optionality
If digitisation is the foundation, what should be built upon it is operational flexibility. The recent context has proven that refineries are strategic infrastructure, and a site which demonstrably shores up security of supply has a claim on public support and cheaper financing, the kind the European Investment Bank has already extended to conversion projects. That is a card European refiners should play.
Hydrogen belongs in the same story, though it needs a cooler head. Wood MacKenzie analysts Murray Douglas, Alan Gelder, and Gavin Thompson claim that refineries will become the backbone of the EU’s green hydrogen ambitions, and there is something to it. Under RED III, refiners must swap fossil-based hydrogen for the green variety, and analysts reckon the sector will need roughly 500,000 tonnes a year by 2030. It would be unwise to bank the whole transition on this. Green hydrogen has been long on promise and short on delivery, with only a fraction of scheduled projects ever completed.
There is margin to be found off the fuel slate too. Where it makes sense, refiners should lean harder into petrochemical integration, since aromatics and olefins uplift is what keeps integrated sites off the closure list. You will not turn a mid-size cracker into a crude-to-chemicals plant overnight, but selective integration and a local offtake for petrochemical feedstock change the risk profile.
These strategies go in the same direction: one where the headwinds will persist and so will carbon costs, softer demand and an uneven playing field. The sites that are able to flex their slate and earn from the disruptions are the ones that will still be standing strong in 2035.
