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Total to cut French refining capacity on low demand

08.28.2014  | 

“Refining has to be adapted to demand and demand is dropping,” Christophe de Margerie said at a meeting of the French employers’ group. “When demand drops, producers have to deal with it.”

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By TARA PATEL
Bloomberg

Total, Europe’s biggest refiner, plans to adapt its French processing capacity as fuel demand drops, its chief executive officer said on Thursday.

“Refining has to be adapted to demand and demand is dropping,” CEO Christophe de Margerie said at a meeting of the French employers’ group Medef outside Paris. “When demand drops, producers have to deal with it.”

Total has borne the brunt of lower refining margins and a slump in consumption in Europe, where it operates eight plants. In its home market of France, it has joined LyondellBasell and Petroplus in halting surplus capacity, and peers elsewhere in the region have followed suit.

Total doesn’t plan to pull out of refining altogether, de Margerie said.

“Refining isn’t behind us,” he said. “We are a recognized name in refining and we intend to remain but we have to know how to adapt.”

Total reported a decline in European refining margins in the second quarter to $10.90/ton of crude processed, from $24.10/ton a year earlier.

The refining situation in France can’t last, de Margerie was quoted as saying in an interview with QuestFrance-Entreprises. The company will have to adapt because the losses are structural.

While he said there is no “urgency” in Total’s plans for French refining, he declined to give details on how and when capacity will be cut in France.

The company has already shut a refinery at Dunkirk and a steam cracker at Carling in eastern France to lower capacity. Refiners in France lost 700 million euros ($951 million) in 2013 as margins shrank and the country imported more than half the diesel it used, the Union Francaise des Industries Petrolieres has said.

Total has a target to reduce its European refining and petrochemicals business by 20% from 2012 to 2017. The Courbevoie-based company faced opposition from workers and the state over the closing of the Dunkirk plant, and it promised the government in 2010 it wouldn’t shut another site for five years.



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