More 'pain' ahead for European refiners
Brussels, 24 September (Argus) — European refiners should be focused on being the most profitable, rather than being content with not being the least profitable, said financial services firm Pricewaterhouse Coopers (PwC) director Robert Turner.
Pointing to the closure of the 220,000 b/d Petroplus Coryton plant in the UK, Turner highlighted the risks facing European refiners, saying that the industry faced a “painful, prolonged period of restructuring”. European refiners should be more concerned with being in the upper quartile of profitable refineries, rather than trying to keep out of the bottom quartile, he said.
Drawing a comparison with the British coal industry in the 1980s, Turner said that the industry never expected the restructuring of the sector to be so severe.
Temporary and permanent capacity closures have helped to boost crude refining margins in Europe, Turner said. Nonetheless, “It's going to be exceptionally tough for a lot of refiners to come out the other side of this”.
He added that refiners are not demonstrating sufficient returns on investment, given the risk and volatility inherent in the market, and risk running out of financing options.
On Coryton – for which PwC was appointed administrator - Turner said that the refinery was permanently closed because the best offer came from an alternative use for the site. The plant was bought by a joint venture between Vopak, Greenergy and Shell for use as a product import terminal.
Simon Redmond, director for oil and gas at credit ratings agency Standard and Poors, said that the oil majors are the best-placed investors for the refining industry, given their strong credit ratings. But majors are withdrawing from the sector, or consolidating what refining assets they have, as their strategic focus shifts away from refining.
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