|FORCED TO STAY OPEN, OIL REFINERIES LOSE MONEY|
Aruba, February 13, 2014 — From Croatia to Scotland, governments and unions seeking to save jobs are making it harder to close unprofitable oil refineries, eating into the earnings of such companies as Royal Dutch Shell and Total.
Total, the biggest refiner in western Europe, lost $680 million on refining and petrochemical operations in France last year as it kept a promise to unions not to close plants before 2015. Croatia’s government wants to keep alive two sites it said are vital to the economy, while Scotland’s sole plant is operating only after the authorities stepped in to keep it open.
Competition from newer, larger facilities in Asia, India, and the Middle East, coupled with slumping demand for European gasoline at home and in the United States, has crushed refining margins. Political intervention helped keep some plants open that would otherwise have shuttered, prolonging a regional capacity surplus, according to Dario Scaffardi, executive vice president at Saras SpA, an Italian refiner. Total and Shell, which both process fuels outside Europe and also own crude deposits, are still profitable.
‘‘You have companies who are saying they would like to reduce their exposure to European refining, but there can be political hurdles to doing so,’’ said Toril Bosoni, an analyst at the Paris-based International Energy Agency.
Surplus European capacity is as high as 10 percent, according to Union Francaise des Industries Petrolieres, an industry lobby group in Paris.
The least sophisticated plants in Europe have been losing money from processing Brent crude into fuels since February 2013, according to data compiled by Bloomberg. More advanced sites capable of producing high-value diesel and gasoline from cheaper grades of crude made about $2 to $4 a barrel over the past 12 months. This is still at least $9 a barrel less than competitors make on the US Gulf Coast, the data show.
Reducing the continent’s capacity by 10 percent over the next six years might return operations at remaining plants to pre-crisis levels, Nathalie Brunelle, senior vice president for strategy, development, and research at Total, said last year.
‘‘There will be a further shakeout in European refining,’’ which will take several years, said Marcel van Poecke, managing director of Carlyle International Energy Partners.