Total to stop refining at Grandpuits in 2021: Update 2

Adds union reaction

Total said today it will cease conventional refining at its 93,000 b/d Grandpuits facility near Paris in the first quarter of 2021. The firm plans to invest more than €500mn ($574mn) to turn the site into a biorefinery, as repairing the pipeline linking it to Le Havre would be too costly.

The 400,000 t/yr biorefinery, scheduled to start up in 2024, will produce 170,000 t/yr of biojet, 120,000 t/yr of biodiesel, and 50,000 t/yr of naphtha for bioplastics, primarily processing animal fats (tallow) and used cooking oil (UCO), supplemented with vegetable oils like rapeseed (RSO) but excluding palm oil.

Grandpuits' future as a crude refinery had been in doubt for some time because of long-standing problems with a pipeline that provides around 90pc of its feedstock. Total said its plan was influenced also by France's proposals for energy transition up to 2040. The pipeline issues meant the refinery could only operate at 70pc of its capacity "threatening its long-term financial viability", the firm said, and the only solution was to replace the pipeline at a cost of around €600mn. Grandpuits was also due a costly full turnaround next year.

France's CGT union told Argus that today's announcement for the site falls short of earlier promises made in June, when the firm said it would match the cost of the pipeline repair and refinery maintenance, which comes to €670mn. Total will effectively only spend €360mn at Grandpuits because some of the investment was already pencilled in and because a share of the costs will be carried by joint-venture partners, the union said. The CGT said although workers were not ready to fight to keep the ageing refinery open, they will want reassurances that no jobs will be lost on the site.

Weaker demand and sustained negative margins as a result of the Covid-19 pandemic have weighed on the plant's future — Total kept Grandpuits off line after maintenance earlier this year because of low demand. Total said that it will use Grandpuits for storage of oil products until "late 2023", but said that road and aviation fuel supply for the Paris region will not be affected. "They will be supplied by the refineries at Donges — currently undergoing a €450mn modernisation — and [Gonfreville]," the company said. Total plans to complete an upgrade at the 222,000 b/d Donges refinery in 2023, instead of next year as previously scheduled. Modernisation work includes a new vacuum gasoil hydrotreater and a steam methane reformer. The crude distillation unit (CDU) at the 240,000 b/d Gonfreville refinery remains offline following a fire in December, with company sources saying it is unlikely to restart before mid-2021.

Total has already converted one of its refineries into a biofuels plant. The 160,000 b/d La Mede refinery was closed in 2016 and was converted into a 500,000 t/yr hydo-treated vegetable oil (HVO) plant for an initial investment of €275mn. Its start-up faced some teething issues, and first production was pushed back to the first quarter of 2019 from the original summer-2017 target. Although the firm had to contend with a change in French law removing palm oil from a list of approved biodiesel feedstock, it appears Total's investment has begun to pay off. Chief executive Patrick Pouyanne said in July that La Mede was the firm's only downstream facility to post a positive result during the second quarter.

Refinery rationalisation

Europe has been at the forefront of refinery rationalisation for decades given the maturity of its markets, but the effects of the Covid-19 pandemic and the prospect of an accelerated energy transition are propelling the need to act faster. Conversion to biofuels production increasingly offers an alternative to closure or divestment.

Total recently sold its 110,000 b/d Lindsey refinery in the UK, and its European peers plan to offload capacity globally. Shell is marketing five refineries to reduce its fleet to under 10. BP is looking to reduce refinery throughput globally to around 1.2mn b/d by 2030 from 1.5mn b/d as it ramps up its renewables and power business. Spain's Repsol is embarking on a decarbonisation project at its 240,000 b/d Bilbao refinery, to include a net-zero emissions synthetic fuels plant that will use CO2 from the refinery along with green hydrogen generated from renewable energy.

By Caroline Varin