(EnergyAsia, May 11 2015, Monday) — Asia, Russia and Europe will account for the bulk of the global shutdown of as much as two million b/d in oil refining capacity over the next 18 months, said a US-based consulting firm.

For now, refiners have announced they will close just over one million b/d of capacity, but ESAI Energy said the figure is “likely to be much higher” on account of worsening financial pressure resulting from declining refining margins. Government policies will add to the industry’s woes, according to its latest Global Refining Outlook report.

“The total capacity at risk of closure by end 2016 is as high as two million b/d,” said analyst Chris Barber who wrote the report.

Europe’s refiners have already announced plans to rationalise 320,000 b/d of capacity by end-2016 while the former Soviet states will shutter around 280,000 b/d. In Asia, refiners have plans to cut 420,000 b/d of capacity in Taiwan, Australia and Japan while Saudi Aramco is planning to close its 88,000 b/d Jeddah refinery following the successful start-up of its two new joint venture refineries.

These reported capacity rationalisations alone top 1.1 million b/d.

Mr Barber said policy changes in Japan, China and Russia could put another 700,000 b/d of capacity at risk of closure by end 2016, with Japan preparing to shut down a further 300,000 b/d by March 2017 under orders from the Ministry of Economy, Trade and Industry (METI).

In China, the government’s latest crude import quota policy threatens the survival of as much as 240,000 b/d of capacity operated by the country’s small independent refiners. Russia’s latest changes on product export duties could force the closure of another 160,000 b/d of capacity as domestic refiners will be less protected from international market forces, said ESAI.