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As a result, refining margins – the difference between what they pay for crude oil and what they can make selling the refined products – have surged. In its May 2022 report, the IEA noted, “Global refinery margins have surged to extraordinarily high levels due to depleted product inventories and constrained refinery activity.”
Refiners, especially those that export a lot of fuel to other countries, benefit most, including US’ Valero and India’s Reliance Industries.
More refining capacity is set to come online in the Middle East and Asia, adding global refining capacity by 1 million bpd per day in 2022 and 1.6 million bpd in 2023.
Renewed interest in fossil
fuel investment to plug
supply shortfall
The world is facing its worst energy crisis in decades and Europe is at the epicentre, IEA Executive Director Dr Fatih Birol told Euronews. “We are in the middle of the first global energy crisis. It is felt everywhere around the world. But the most in Europe. Europe was the main buyer of Russian energy around the world: oil, gas, coal and others.”
It is undermining climate ambitions and earlier reservations about investing in fossil fuels.
On 1 June 2022, the Netherlands and Germany announced plans to jointly develop and exploit a new gas field in the North Sea, a day after Russia cut its gas supplies to the Netherlands. This comes a year after the German state of Lower Saxony refused to issue permits for drilling near the eco-sensitive islands of Schiermonnikoog and Borkum. The
first gas from the platform - to be powered by German wind farm nearby - is expected to be extracted by 2024.
In the same month, UK regulators gave Shell the go-ahead to develop the Jackdaw gas field in the North Sea, east of Aberdeen. Slated to begin production in latter part of 2025, Jackdaw could account for 6.5% of UK gas at its peak. Shell’s proposals for the Jackdaw field were rejected on environmental grounds in October 2021.
According to research group Climate Action Tracker (CAT), new LNG facilities are also being proposed in Italy, Greece and Canada while the US, Qatar, Egypt and Algeria have all signed deals to export LNG to Europe.
“There seems to be really a gold rush for new fossil fuel infrastructure,” Professor Niklas Höhne of NewClimate Institute, a CAT partner, told BBC News.
As part of “REpowerEU”, the European Commission has earmarked up to €12 billion for gas pipelines and import facilities for LNG
to secure energy supplies while renewable capacity is built.
The energy shortfall has also prompted countries which had committed to fighting climate change to reconsider using coal, one of the dirtiest sources of energy, as a stop gap measure to meet immediate supply shortage. Among them are Austria, Germany and the Netherlands.
Rebound in
energy mergers and
Global mergers and acquisitions (M&As) in the oil and gas industry rebounded in 2021, rising 16% to US$335 billion in 2021, even though the volume of activity was largely flat at around 1,800.
“With oil prices edging upwards in 2021, oil and gas companies felt more confident in undertaking high-value deals to push forward their growth plans,” said data and analytics company GlobalData.

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