US, European refiners maintain capacity cutting efforts

The global refining sector continues to undergo a wave of strategic and operational closures reflecting evolving market dynamics, regulatory pressures, and individual operators’ programs for transitioning their portfolios to remain competitive in a future low-carbon landscape.

Alongside presenting major US and European refinery shutdowns either completed or announced during the past year, this article examines implications of these closures for global fuel supply, trade flows, and refining economics.

US conventional refining cuts

Despite emergence of a potentially more favorable regulatory environment in the US, the region experienced two major shutdowns during 2025.

Following its 2022 announcement of a proposed closure initially scheduled for 2023, LyondellBasell Industries Holdings BV completed permanent shutdown of subsidiary Houston Refining LP’s (HRL) 268,000-b/d full-conversion refinery during first-quarter 2025, officially ceasing production activities at the site in February (Fig. 1).

With the shutdown marking LyondellBasell’s complete exit from the refining business, the operator said it is evaluating multiple options to transform the site for future growth in line with its ambition to achieve net-zero Scope 1 and 2 emissions by 2050. Options under consideration include upgrading the site for chemical recycling to process plastic waste, producing renewable cracker feedstocks such as renewable distillates and bio-based feedstocks, and repurposing on-site infrastructure to support growth of circular and low-carbon product innovation.

Phillips 66 Co. confirmed in early November 2025 completion of work to permanently end crude processing at its 138,700-b/d dual-sited refinery in Los Angeles, Calif.

Confirmation of the closure follows the operator’s late-October launch with partner Kinder Morgan Inc. of a binding open season for transportation service on the Western Gateway Pipeline (WGP), a newly proposed refined products pipeline system to increase fuel supply to the US West Coast (USWC).

Proposed as a 1,300-mile grassroots liquid product pipeline from Borger, Tex., to Phoenix, Ariz., the WGP would be connected to Kinder Morgan’s existing SFPP LP pipeline from Colton, Calif., to Phoenix, Ariz., which would be reversed to enable east to west product flows into California.

WGP would be fed from Phillips 66’s 149,000-b/d Borger refinery, as well as supplies already connected to Kinder Morgan’s El Paso terminal. The Phillips 66-operated Gold Pipeline, currently flowing from Borger to St. Louis, would be reversed to enable refined products from Phillips 66’s 217,000-b/d Ponca City and 345,000-b/d Wood River refineries to flow toward Borger and supply the WGP.

The proposed products pipeline followed Phillips 66’s September agreement to acquire the remaining 50% interest in WRB Refining LP from partner Cenovus Energy Inc. for $1.4 billion in cash to give Phillips 66 full ownership of the Borger refinery.

If the WGP pipeline advances to its targeted completion by 2029, it would become the first pipeline system to deliver motor fuels from outside the USWC into California and help to replace fuel production lost with Phillips 66’s Los Angeles closure, as well as  Valero Energy Corp.’s April-announced plan to shutter its 145,000 b/d Benicia refinery, just north of San Francisco, by the end of April 2026.

According to the WGP project partners, the proposed pipeline would be capable of "supplying 200,000 b/d of [US] Midcontinent refined products directly into Arizona, replacing the estimated 125,000 b/d that Phoenix currently receives via Kinder Morgan’s SFPP pipeline from California, allowing those volumes to remain in California, increasing supply availability for in-state markets."

The Los Angeles refinery closure and proposed shutdown at Benicia come amid growing concerns by California’s in-state refiners that unfavorable market conditions alongside regulatory pressure stemming from aggressive state legislation will prevent the long-term viability of crude processing activities in the region.

With the state’s loss of about 20% of its traditional crude processing capacity since 2020—and nearly another estimated 20% at threat with the combined closures of the Los Angeles and Benicia sites—California state officials in second-half 2025 voted to delay enactment of legislation blamed for decisions by California refiners to end operations at their conventional processing sites. At yearend, however, the refiners were continuing their shutdown plans.

In its third-quarter 2025 earnings conference call in late October, Richard Walsh, Valero’s executive vice-president and general counsel said that, while the operator has been in discussions with California’s state government "nothing has materialized out of that."

"[O]ur plans [to shutter Benicia] are still moving forward as we've shared and as we've informed the state," Walsh confirmed.

European shutdowns, sell-off plans

Weak product demand, high energy costs, and tightening environmental regulations continued to weigh on refining economics for European operators, prompting additional cuts to regional capacity.

In late-April 2025, 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 completing the partners’ previously announced plan to shutter jointly held Petroineos Manufacturing Scotland Ltd.’s 150,000-b/d Grangemouth refinery complex on the Firth of Forth in Scotland.

The site is currently planned for conversion into a finished fuels import terminal and distribution hub.

The partners said the refinery closure and site transition directly resulted from a collision of global market pressures, the global energy transition, and reduced demand for conventional fuels, the combination of which left the aging refinery unable to compete with more modern and efficient sites in the Middle East, Asia Pacific, and Africa.

Elsewhere in April, Shell PLC stopped crude processing at Shell Deutschland Oil GMBH’s 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. As of early October, work was under way to dismantle the Wesseling refinery’s hydrocracker for repurposing to a new 300,000-tonne/year base oils plant at the site, scheduled for completion by yearend 2028. 

Elsewhere on the continent, bp PLC revealed in February a plan to divest its Ruhr Oel GMBH–BP Gelsenkirchen (ROG) 251,510-b/d refinery and related assets in Gelsenkirchen and Horst and Scholven, Germany, which is operated as an integrated refining and petrochemical site (Fig. 2).

The proposed sale follows bp's March 2024 announcement of a plan to transform the Gelsenkirchen refinery site by 2030 to increased production of lower-emission fuels using co-processing of renewable feedstock. The proposed sale comes as part of the company’s plan to reposition its broader portfolio with a focus on its most advantaged assets. By yearend 2025, a buyer for the site had yet to emerge, but the sale process continues, bp said in its third-quarter 2025 presentation.

Margins, utilization, trade flows

While the US and European closures in 2025 alleviated some capacity pressure amid concerns of future declining demand for conventional fossil-based fuels, margin pressure remains a backdrop.

The International Energy Agency lowered its global crude-run forecast for 2024 to 82.8 million b/d due in part to refining struggles. Separately, global refining margins fell to multi-year seasonal lows in September 2025, driven by weaker product demand despite tightened capacity.

Additionally, as US and European refiners continue to rationalize capacity, they potentially position themselves to become more reliant on imports of finished fuels or intermediate feedstocks. Capacity losses in Europe—particularly the UK and Germany—could shift fuel sourcing toward Middle Eastern and African exporters, or increase Atlantic cargo flows of finished products.

By yearend 2025 US and European refinery shutdowns shared a common bond of strategic repositioning involving ageing assets, tightening regulations, and a long-term goal of transitioning toward lower-carbon or circular business models. LyondellBasell’s Houston conversion, Shell’s Wesseling transformation, and Europe’s growing post-refinery import-terminal conversions all illustrate this shift.