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European refining to remain uncompetitive

Hydrocarbon Engineering,

An analyst with GlobalData has said that with new and more efficient refineries coming online in the Middle East and Asia this year, combined with lower cost product imports from the US, European refineries are being squeezed out of their local and export markets.

Uncompetitive in the global marketplace

GlobalData’s managing analyst, downstream oil and gas, Carmine Rositano has said that the European refining sector is uncompetitive in today’s global marketplace and that lower feedstock and energy costs provide US refineries with a significant cost advantage compared to European companies.

‘Product imports from the US into Europe have steadily increased since 2008, reaching about 600 000 bpd in 2013. With a lower cost structure, US refiners are now exporting more products across the globe, taking away market share from European refiners,’ continued Rositano.

It has additionally been reported that the French refining sector incurred a net loss of approximately US$ 950 million last year.


‘Major oil companies, such as Shell, BP, ExxonMobil and Total, reported lower international downstream profitability in 2013 compared to 2012. European refinery runs in the last quarter of 2013 were lowered by a few hundred thousand barrels per day, as the European hydroskimming margin was negative and the cracking margin was just over breakeven levels,’ said Rositano.

Also, new and more cost efficient refineries are soon to come online in Saudi Arabia and India, running lower cost crudes than European refineries. Saudi Arabia’s Jubail and Yanbu refineries have been configured to maximise the product yield for ultra low sulfur diesel, which is a structural deficit position in Europe.

Europe’s future

GlobalData forecasts that oil refined product demand in Europe will decline further due to energy efficiencies as well as lack of competitiveness. Higher energy taxes are also likely to have an adverse impact, specifically on throughput volumes.

Rositano concluded, ‘lower refining runs and refinery closures of about 100 000 bpd to 200 000 bpd per year are likely to happen in Europe, especially in smaller sized and higher cost structure refineries. This will provide opportunities for US and export oriented Middle East and Asian refineries to capture additional ultra low sulfur diesel market shares in Europe as well as gasoline shares in other regions.’

Adapted from a press release by Claira Lloyd.

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