A New Wave of Refinery Closures

abarrelfullabarrelfull wrote on 21 Oct 2013 06:51
Tags: europe refinery

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Refining margins, particularly in Europe have been weak this summer, and European refiners have been suffering. In fact, such has been the trials of the market, that you cannot help wondering when the next rush of closures is going to come.

Europe suffers from a surplus of capacity, from refineries that are configured to produce too much gasoline, shrinking demand and high energy prices. This is in addition to the massive working capital needs that high oil prices mean. In the USA, cheap WTI indexed crude, more complex refineries and the wonders of shale gas, mean that US refiners on the whole, are in much better shape. Europe just cannot compete.

So the problems of Grangemouth Refinery, seem to portend the beginning of the rush.

A couple of weeks back, MOL announced that the Mantova Refinery was to close. What these 2 refineries have in common, is that they were previously acquired by their current owners, with expectations that the sector would do better. Grangemouth was acquired just 2 years ago.

The question on everyone's lips is who will be next?

Although sector fundamentals mean that closures are inescapable, politics is making the situation even worse. Much of Europe still has higher taxes on gasoline than diesel, making the gasoline surplus even worse, and on the energy cost side of the equation, rather than embracing the potential of shale gas, Europe's politicians are trying to stop it happening. So Europe's refiners can only look in envy the advantages their competitors in North America have, whilst the future of their plants and workers lay in the balance.

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