PTQ Q1 2026 Issue

The future of petroleum refining: transform now or later? Part 2

Global refiners struggle to balance short-term profits with long-term sustainability due to uncertainties in business and legislation during the energy transition

Diana Brown and Thomas Yeung Hydrocarbon Publishing Company

A s discussed in Part 1, published in PTQ Q4 2024 , the global petroleum refining industry faces immense pressure. The accelerating energy transition, stricter environmental regulations, and ongoing geopolitical uncer- tainties are challenging traditional business models. This raises a critical question for refiners: should they transform their plants into diversified energy centres now or wait for a more opportune time? Recognising that survival and long-term prosperity hinge on a holistic approach, this article centres on three inter- connected and critical pillars: profitability, sustainability, and flexibility (see Figure 1 ).1 Refiners must not only meet evolving environmental mandates and societal expecta - tions but also maintain and enhance their financial perfor - mance in an increasingly competitive market. Furthermore, the ability to adapt operations and product portfolios in response to shifting energy demands and regulatory changes is paramount. To sustain the refining business, there are two technol - ogy-driven strategies for the energy transition: product investment in demand and renewable fuels (as discussed in Part 1), and decarbonisation and environmental stewardship. Decarbonisation and environmental stewardship To sustain future business, refiners need to place a greater emphasis on: • Procuring low-carbon-intensity and carbon-neutral crudes. • Implementing electrification and cogeneration/combined heat and power (CHP)/integrated gasification combined cycle (IGCC) systems. • Identifying technologies and actionable strategies for car - bon capture, utilisation, and sequestration (CCUS). • Addressing environmental controls related to flue gas releases, flaring, greenhouse gas (GHG) emissions, and wastewater treatment. • Investigating the seamless integration of abundant renewable energy sources, such as solar and wind power, directly within refinery complexes. Low-carbon intensity and carbon-neutral crudes The global energy landscape faces a fundamental ten - sion: meeting immediate energy needs while striving for

Protability

Sustainability

Flex i bility

stringent decarbonisation. Recent geopolitical events, including the Russia-Ukraine crisis and initial shifts in US policy, have prompted some governments to reconsider fossil fuel reliance, highlighting the conflict between short- term energy security and long-term climate goals. This complex scenario intensifies the focus on carbon intensity (CI) of crude production, a critical metric measuring GHG emissions per unit of crude. Upstream CI, encompassing emissions from extraction to transport, varies significantly based on resource qual - ity, energy use, and emission controls (for example, Oil Production Greenhouse Gas Emissions Estimator [OPGEE] data). Regions with high flaring and energy-intensive extraction exhibit the highest CI, though future trends could be influenced by technologies such as direct air capture and solar-powered steam generation. Driven by carbon pricing, the oil industry is actively benchmarking and reducing CI by eliminating flaring, improving methane leak detection, and using renewable energy. The emergence of ‘carbon-neu - tral’ crudes, relying on offsets, reflects this trend, though their credibility, particularly regarding scope (well-to-tank vs tank-to-wheel), remains scrutinised. As emissions pol - icies tighten, lowering CI will become vital for producers, and seeking low-CI crudes will be crucial for refiners. There are factors affecting CI, including energy con - sumption, flaring, fugitive methane, and renewable energy use, alongside CI calculation methodologies, crude avail - ability, and profitability given potential oil demand shifts. Figure 1 Transforming refining strategies to meet profita - bility, sustainability, and flexibility

PTQ Q1 2026