Here is a summary of the study called “Study on the potential evolution of Refining and Liquid Fuels production in Europe“ published by S&P Global in February 2025. This summary has been prepared by Heeding Climate Solutions.

This study, conducted by S&P Global Commodity Insights (SPGCI) in collaboration with National Fuel Industry Associations for Concawe, analyzes the potential impact of the EU’s net-zero emissions target by 2050 on the European refining industry and the security of supply. To achieve this, SPGCI developed two hypothetical scenarios: Max Electron, which envisions achieving net-zero primarily through increased electrification, and More Molecule, which emphasizes a greater role for low-carbon fuels, particularly biofuels. The study examines the implications of these scenarios on fuel demand, supply, refinery operations, and the emerging market for sustainable fuels across the EU+ region (27 EU countries plus Norway, the UK, and Switzerland).

The foundation for these scenarios lies in a review of key European legislation aimed at reducing greenhouse gas (GHG) emissions. This includes the European Green Deal, Fit for 55 package (with initiatives like ReFuelEU Aviation and FuelEU Maritime), and REPowerEU. These legislative frameworks establish targets for GHG emissions reduction, renewable energy integration in transport, and the uptake of sustainable aviation fuels (SAF) and maritime fuels. The UK Renewable Transport Fuel Obligation (RTFO) is also considered, aligning with the EU regulations for the purpose of this study. These regulations are critical market drivers, creating mandates and incentives for the production and consumption of sustainable fuels.

Both the Max Electron and More Molecule scenarios project a substantial decline in fossil fuel demand in the EU+ region by 2050, leading to a massive reduction in required traditional refining capacity. The LP (Linear Programme) modelling conducted in the study indicates that economic factors, particularly negative net cash margins influenced by declining demand and increasing emission costs, will prompt significant refinery capacity rationalization. Prior to 2050, the Max Electron scenario foresees a rationalization of approximately 10.7 million barrels per day (bbl/d) of refinery capacity, while the More Molecule scenario anticipates around 11.1 million bbl/d. This highlights the significant market shift away from traditional refining towards new fuel sources.

The emergence of a sustainable fuel marketplace is central to both scenarios, albeit with different emphasis. Biofuels are expected to play a crucial role, particularly in the More Molecule scenario. The study analyzes the potential supply of biofuels from various feedstocks, including Annex IXA (advanced biofuels), Annex IXB (waste-based biofuels), and crop-based sources. While crop-based biofuel production is projected to decline to zero by 2050 to meet GHG reduction targets, the potential availability of advanced and waste-based biofuels through EU domestic production could reach 137 MMtoe by 2050 with improvements in biomass collection and R&D. The demand for biofuels in the More Molecule scenario approaches the upper range of this estimated potential, indicating a greater reliance on their supply. SPGCI's database of biofuel plants provides insights into current and planned production capacity in the EU+ up to 2030, showing a total biofuel capacity of 36.05 MMtoe by then. Achieving the long-term biofuel supply, especially for advanced feedstocks, will require significant improvements in biomass mobilization and R&I.

Renewable Fuels of Non-Biological Origin (RFNBO), including green hydrogen and e-fuels, are also crucial for decarbonizing hard-to-abate sectors in the long term in both scenarios. RFNBOs also offer a way to store renewable power and address the intermittency of renewable energy generation. The More Molecule scenario projects a 11% higher RFNBO demand by 2050 compared to Max Electron. The total RFNBO green hydrogen generation in the EU+ is expected to reach approximately 111 MMtoe. However, the study indicates a significant potential deficit of RFNBOs in the EU+ by 2050, reaching 32% of total demand in Max Electron and necessitating imports of green hydrogen or synthetic fuel molecules. Similarly, e-fuels capacity in the EU+ is projected to grow, based on firm and speculative projects up to 2030 and then linked to green hydrogen availability. Both scenarios anticipate a considerable deficit in e-fuels by 2050 (56% in Max Electron and 59% in More Molecule), highlighting a substantial market opportunity for e-fuel production and imports.

The transition to a sustainable fuel marketplace will significantly impact refinery economics. The LP modelling forecasts declining net margins for conventional refineries, driving the aforementioned capacity rationalization. It's important to note that the study's LP model focuses on conventional fossil fuel refineries and does not account for potential financial performance improvements if these sites transition into bio-refineries.

Analyzing the security of supply in this evolving market, the study shows that while the EU+ may maintain a refining cover surplus for gasoline, deficits are expected for middle distillates (diesel and kerosene) in the near to medium term with conventional fuels. As the market shifts towards sustainable fuels, the supply-demand balance for biofuels and e-fuels will determine the overall liquid fuel security. The increasing reliance on imported green molecules (hydrogen and e-fuels) necessitates the development of robust transportation infrastructure.

The study also considers the distribution of bio- and e-fuel production capacity across different EU+ country groupings. These projections, while anonymized at a country level, indicate where investments in sustainable fuel production might be concentrated.

In conclusion, the study paints a picture of a rapidly transforming fuel marketplace in Europe. Driven by ambitious climate targets and supportive legislation, the demand for fossil fuels will decline significantly, paving the way for a substantial increase in the production and consumption of sustainable fuels like biofuels and RFNBOs. While domestic production of sustainable fuels is projected to grow, significant deficits, particularly in e-fuels and potentially green hydrogen, suggest a strong future market for both domestic production scale-up and imports. The traditional refining sector will face significant challenges and consolidation, highlighting the need for strategic shifts towards biofuel co-processing or dedicated biorefining to maintain viability. The development of efficient and safe transportation infrastructure for green molecules will be crucial for ensuring the security of supply in this emerging sustainable fuel marketplace.