By CASSIE WERBER
BRUSSELS -- Europe's oil-refining businesses will have to slim
down further and then pump billions of dollars into what
remains, the head of one of Europe's leading oil trade
associations said Thursday.
Michel Benezit, president of Europia, a trade
association for Europe's refiners, presenting a grim outlook
for refining in the region, said $21 billion will need to be
spent on investment in the continent's refineries and that
retaining sufficient refining capacity was key to Europe's
Since 2008, some 15 European refineries have
closed, representing 8% of the continent's capacity. The
industry is hobbled by having too many plants set up to refine
gasoline and not enough to refine diesel, a technical mismatch
with demand that is hard to rectify. Meanwhile, appetite for
refined products overall is waning.
Speaking at the Platts European Refining Markets Conference, a
meeting of Europe's refiners held each year in Brussels, Mr.
Benezit said close attention needs to be paid to industry
dynamics and warned against losing the ability to refine in
"We all know that demand for refined products
has declined," he said. Gasoline demand has fallen 17% over the
past five years alone, according to Europia's figures.
How many more closures will be required "is
anybody's guess" but more than 2% of existing capacity would
have to go, Mr. Benezit said.
What remains of the refining sector will need huge
investment to deal with efficiency requirements and concentrate
on valuable products, he said. At least $21 billion will need
to be pumped into the industry by 2020, on top of the nearly
$30 billion that has been spent in the last five years.
These combined amounts represent about $1 of
capital expenditure for every barrel processed, in an
environment where the refining margin -- or profitability -- is
typically about $1-$5/bbl.
This week's US oil data from the Energy
Information Administration showed that refineries on the US
Gulf coast are running at near full tilt, suggesting that
refiners there will continue exporting products to Europe. The
US, which used to import much of the gasoline it consumed, is
now meeting many of its domestic needs by refining oil derived
from shale. The US oil boom increases the likelihood of a
sustained period of high product availability that could crush
margins for all refiners in Europe, according to analysts at
The development of refining outside Europe in places
like the Middle East and China has also introduced competition.
These "unequal environment policies" have lower environmental
requirements to Europe, Mr. Benezit said Thursday.
Increasing legislation in Europe and the loss
of key markets such as the US are also squeezing the industry,
he said, along with the development of more fuel-efficient
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