Europe faces 40 refinery closures on ‘major obstacles, regulation’

THE HAGUE (ICIS)–The European refining industry faces major challenges in the next 20 years as a result of energy cost and “huge” regulations with as much as 40 refineries in risk of closure, the chairman of the UK Petroleum Industry Association (UKPIA) said on Tuesday.

Chris Hunt said the challenges could mean as much as 40 out of the 82 refineries in Europe could face closure.

“Europe’s refineries are facing a huge problem about regulation, environmental regulation especially, which is much stricter than in other parts of the world, as well as the energy cost which makes refining’s cost far higher than in other parts of the world,” said Hunt.

In opposition to the bleak picture of refining in Europe, Hunt added that the shale gas revolution in the US is “long term” and it is helping refining margins to stay healthy, as well as bringing considerable capital investment into the country.

Alessandro Bartelloni, policy director at trade group FuelsEurope, which represents 42 refiners, said demand for transport fuels in Europe will gradually decrease and forecast, citing ExxonMobil 2015 energy outlook, that full hybrid vehicles – electric- and fuel- fed – will represent almost half of the market by 2040, with the consequent loss for oil-based fuels.

“The future will change significantly. Europe and Asia will close down refineries, and China, Middle East, India and North America will see a growth in the number of refining centres,” said Bartelloni.

Refineries in Europe, however, could still find a market in exporting their products, as global demand will keep growing.

Integration of refineries (crackers plus petrochemical complexes) happens in 40 out of 59 crackers, and risking the loss of the refineries would also put at risk the survival of the petrochemical complexes, said Bartelloni.

“The ETS [the EU’s Emissions Trading System] is unique to the EU, and this puts us in a disadvantage against our competitors. Moreover, the Energy Union proposals presented by the European Commission lack a recognition of the importance of petroleum products in the EU economy and how it could help reverse the decline in industrial value creation in Europe,” said Bartelloni.

Both Hunt and Bartelloni were taking part in the 9th annual Global Refining and Petrochemical Summit, being held in The Hague on 20-22 April.

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