A planned major expansion of Scandinavia's largest oil refinery, fiercely opposed by environmental activists, was scrapped Monday, Swedish oil company Preem said.

Preem said "the economic logic of investment in this project no longer stands" as a "result of the COVID-19 crisis' effects on the energy sector globally."

As such the application for a permit would "be withdrawn in favour of a re-prioritisation centred around renewable production."

The company had applied for a permit for the expansion of the Lysekil refinery on Sweden's west coast in 2016, but the process dragged out following a legal battle with environmentalists who contested the original permit granted in 2018.

In June, the Swedish Land and Environment Court of Appeal gave its approval to the project, but the final decision rested with the Social Democratic government of Prime Minister Stefan Lofven, which includes several ministers from the Green Party.

The expansion would have included a facility to refine heavy fuel oil into diesel and gasoline after new regulations from the International Maritime Organization (IMO) on the use of fuel in shipping came into force in January 2020.

Despite Preem's assurances that the added local emissions would be more than offset by the higher quality fuels and the sourcing of renewable fuels, the expansion plans have angered climate activists.

Environmental groups have in turn argued that the expected increase in emissions of up to a million tonnes of carbon dioxide a year was impossible to reconcile with Sweden's commitments under the Paris climate accord.

"What a huge victory for the climate and environmental movement!," Swedish climate activist Greta Thunberg said in a post to Twitter.

Two weeks ago, Greenpeace blocked access to the refinery by anchoring its ship Rainbow Warrior in the fjord outside the refinery, stopping tankers from both reaching and leaving the refinery for three days to protest the expansion.

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