Europe refinery operating rates to stay depressed - consultant

23 November 2010 14:56  [Source: ICIS news]

BERLIN (ICIS)--Refinery operating rates in Europe are expected to remain low over the next few years, with the current environment of low margins leading to closures and indefinite shutdowns, according to Matthew Chadwick of energy consultants Wood Mackenzie.

Speaking at the 9th European Aromatics & Derivatives Conference in Berlin, Germany, Chadwick said the global financial crisis that had hit in late 2008 led to the cancellation of numerous refinery projects planned during the "golden age" of 2006-2007.

However, he added that this had not helped the current pressure on refineries as these projects were due to come on line in three or four years’ time.

Chadwick predicted that around 1.3m bbl/day of refining capacity would remain closed globally.

As a result of lower utilisation rates at refineries, feedstock supply for aromatics would remain restricted, despite overall demand taking a severe hit after the global economic meltdown.

Chadwick added that exports from the Middle East would put additional pressure on the European aromatics market.

However, he added that there were some refineries that had stayed competitive, largely due to their location within a strong market, value-added configuration, low-cost crude and low-cost delivery methods.

Chadwick said that he expected to see strong growth in utilisation rates in emerging markets such as India and China, largely driven by demand for transport fuel.

Chadwick also forecast that from 2007 to 2020, demand for oil in emerging markets would grow by 18.2m bbl/day, while mature markets would see demand fall by 3.4m bbl/day over the same period.

In light of this, many oil majors were reducing their exposure to refineries in Europe, although Chadwick said that such moves were company-specific, as players focused their attention on different regions and derivative markets.

Despite the gloomy prognosis for European refineries, Chadwick said that the forecast supply/demand balance for key products such as diesel and gasoline would actually give Europe an advantage over the North American market.

With diesel supply higher in Europe and more strongly priced, this was positive news for European refineries compared with their American counterparts, which produced more gasoline, Chadwick said.

The 9th European Aromatics and Derivatives Conference takes place in Berlin, Germany, on 23-24 November 2010.

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By: Truong Mellor
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