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Page added on March 30, 2009

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Europe's oil refining set to shrink

LONDON (Reuters) – Vanishing gasoline demand from the United States and a long-term fall in local oil use mean Europe’s refiners are shutting down capacity — for good.

Already Total, Europe’s largest refiner, has said it will shut a quarter of its Gonfreville plant, the biggest in France.

Old refineries are particularly vulnerable. Swiss-based Petroplus will turn its UK Teesside plant into a depot if it cannot find a buyer and Italy’s ENI wants to sell its Livorno plant.

Morgan Stanley said in a research note this month that margins, the measure for refinery profitability, would average about $4.00 a barrel in Northwest Europe this year, less than half of the bank’s estimate of an average $8.47 last year.

Europe’s oil industry has for long relied on supplying the U.S. market with gasoline, but a source at Total’s Gonfreville said profit margins have collapsed as gasoline exports had shrunk.

With European oil consumption itself in long-term decline, refiners may now shift from simply reducing gasoline output to permanently cutting the capacity of crude distillation units (CDUs), or even closing a refinery.


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