February 4, 2010 at 8:50 pm #2772
Total has keep cutting Refining capcity in Europe
2/2/2010 Dow Jones wire
French oil major Total SA (TOT) has no choice but to keep cutting refining capacity in Europe, and especially France, as demand for refined petroleum products continues falling in the region, Michel Benezit, the group’s head of refining and marketing said Monday in an interview with Dow Jones Newswires.
“We can’t do differently; we must keep adjusting to falling demand,” Benezit said, without specifying where and it what way Total will trim its refining capacity.
With governments tightening environmental standards, especially through carbon taxation, demand for petroleum products faces structural weakness, Benezit suggested. “Even the expected economic recovery won’t help demand bounce back,” he said. As far as Europe and France are concerned, “there is no way to say when the refined products market will be balanced again,” Benezit added.
But the company is finding that cutting refining capacity, especially in its French home market, could be difficult, or at least uncomfortable.
Earlier Monday, Total said it was deferring a much-awaited decision on the fate of its Flanders refinery, near Dunkirk in Northern France, until the end of June. The postponement came amid intense political pressure to preserve jobs.
Operations at the 137,000 barrel-a-day Flanders facility have been suspended since last September due to weak European product demand and depressed refining margins that made running it uneconomic. The Flanders refinery “doesn’t have a market to serve anymore,” Benezit said.
In a recent interview with Dow Jones Newswires, Total Chief Financial Officer Patrick de la Chevardiere said the company had been losing around EUR100 million a month on its European refining activities.
Total’s European refining margin indicator–a profit calculation for refining a ton of crude at a hypothetical complex refinery in Northwest Europe–fell more than 70% year-on-year to $11.70 a ton in the fourth quarter of 2009.
Total had been mulling several alternatives at Flanders facility, including a complete closure, mothballing or conversion to a storage facility. It even tried to sell it. Russia’s oil major Lukoil Holding (LKOH.RS) considered buying the plant, but backed away, Benezit said.
Benezit said the government’s concern is more over retaining jobs for Total employees than over the fate of the Flanders facility.
Indeed, Total said earlier in the day that regardless of what it decides for the refinery, it will guarantee each employee there a job elsewhere in the company and stressed it is ensuring that the Flanders establishment has a future somewhere within the group.
Over the 12 months before Flanders was idled last Sep. 15, the refinery produced 6.5 million metric tons of oil products, of which the French market absorbed less than a half. Around 2.8 million tons were in surplus and had to be shipped to the U.S. “and even farther” abroad, Benezit said, without elaborating.
Still, refining markets in other locations of the world, such as in China and in the Middle East, are expected to keep growing this year, Benezit added.
Copyright (c) 2010 Dow Jones & Company, Inc.
You must be logged in to reply to this topic.