Balancing refining, chemicals and retail to optimise future performance

In the first part of Wood Mackenzie’s Corporate Downstream Benchmarking report in December 2025, our analysts discussed how oil and gas companies active in the downstream sector were under pressure to reposition for a decline in long-term demand and a volatile energy transition. 

In the second part of our special report from our new Corporate Strategy and Analytics (CSAS) – Downstream service, we examine how the same 23 downstream players will need to weigh divergent risk-reward profiles across refining, chemicals, and retail to optimise their portfolios.

To receive a complimentary selection of slides from our report, fill in the form at the top of the page, then read on for a brief outline. 

Refining remains the cash engine 

Refining is the downstream cash engine for the peer group, at around 57% of EBITDA through 2030. The cycle is likely to have bottomed out in 2025, with net cash margins (NCMs) averaging US$4.3/bbl, and is set to gather pace through 2030, as NCMs pick up to an average US$6.4/bbl.  

North American players, such as Suncor and HF Sinclair, are set to capture the highest margins thanks to their feedstock advantages and market isolation. US-centred portfolios are also benefitting from persistent undersupply in neighbouring Mexico and Latin America. New potential for higher Venezuelan production widens light/heavy crude pricing differentials, benefiting high-complexity refiners in the US, India and China. 

Portfolios exposed to Europe and the Middle East, like Eni, TotalEnergies and Aramco, face headwinds such as high costs and overcapacity. The abundance of assets running at a loss in the national oil company (NOC)-dominated regions of Asia and the Middle East are driving down utilisation rates and compressing margins, despite strong demand fundamentals. 

Closures continue to outpace additions in the group of companies we cover, with the closures primarily in Europe and California. The Majors are divesting non-core assets, while organic growth is almost the exclusive domain of NOCs.

Petrochemicals are crucial to future profitability 

Petrochemical earnings will remain in bear territory this decade, but the long-term growth prize remains. By 2030, ethylene capacity in the group we cover will have almost doubled since 2016, from 46 mmtpa to 87 mmtpa.  

Resilience to the energy transition is attracting record investment. The growth will stem mostly from China. The Middle East will add 3 mmtpa, while the US buildout is pretty much done. 

Margins are set to remain depressed through 2030, capped by the massive wave of new (Chinese) capacity additions. Most of the Chinese NOCs’ new ethylene capacity will be integrated in a bid to reduce fuel output and boost petrochemical production. 

The global ethylene market is likely to rebalance in the late 2020s, as demand catches up to supply. North American producers continue to benefit from lower ethane prices, maintaining a cost advantage over their European and Chinese peers. 

Shell has said it is not a "natural owner" of chemicals businesses and is instead exploring US partnerships and European high-grading. Exxon and Aramco, meanwhile, are doubling down on chemicals as a growth engine. Underperformers Eni, ONGC and PETRONAS should see the largest rise in margins thanks to new capacity and the closure of challenged sites. 

Retail portfolios are on the wane  

Retail strategies are diverging as the US Majors go asset-light and the Euros bet on premium. Portfolios are shrinking globally, as they have been since the pandemic, with Europe seeing the most retrenchment. Retail and refining portfolios tend to overlap geographically, with Asia and North America dominating the group in terms of number of sites.  

Shell remains the world’s largest retailer, with a well-diversified geographical footprint, but is also right-sizing. Asian NOCs show the highest commitment to controlling their retail networks through direct ownership, a reflection of their strategic mandates for energy security and full value-chain integration. 

The Euro Majors, meanwhile, are pivoting to company-owned sites to capture high-margin non-fuel and electric vehicle charging growth. The US Majors continue to pursue capital-light branded franchise models, outsourcing operations. 

Adaptability is key  

Pressure to rethink the entire downstream business has softened. However, the downstream winners will deploy capital today to ensure operations can adapt to either a delayed or accelerated transition scenario, continuing to stress-test portfolios this decade. 

Navigating the transition requires a "toolkit" approach to portfolio resilience. Key levers for sustainability include deep petrochemical integration, biofuels (sustainable aviation fuel and hydrotreated vegetable oil) and circular plastics. 

Large greenfield refining projects are unlikely outside of the Asian NOCs, in our view. Companies are likely to prioritise efficiency and high-grading over growth. Closures are likely to persist, mainly in Europe. 

While refining is generating the cash today, chemicals exposure will be critical to long-term health, offering crucial transition-proof demand. The margin outlook after 2030 is upbeat. More projects are likely and select international oil companies could seek to secure more footholds in high-demand areas.  

To receive a complimentary selection of slides from our report, please fill in the form at the top of the page.