Accordingly, per Oil market surveyor, experts and consultant the threat still looming on refineries on the verge of shutdown or mothballed in addition to our MUMBAI MULTIMEDIA STUDIO previous blogs on the subject is as follows:
The collapse in oil demand from the COVID-19 pandemic is hastening the reckoning for those refiners already struggling as new capacity overtakes demand, posing an existential threat to several, particularly Europe’s ageing plants. Even before the pandemic struck, which at its height destroyed over 20% of world oil demand, analysts expected global refining capacity would must rationalize, particularly in Europe.
According to consultants and market experts WoodMac, 1.4 million barrels per day, or around 9%, of refining capacity is under threat of rationalization in Europe in 2022-2023. Also, declined to call specific refineries, but in a recent list sent to its clients and reviewed by Reuters. BP’s 377,000 bpd Rotterdam refinery, Total’s 102,000 bpd Grandpuits refinery in France and Petroineos’ 200,000 bpd Grangemouth refinery in Scotland were among 11 plants mentioned in the list.
The three companies failed to response Reuters request for further comment. Last week, one of the energy trader said it is absolutely considering mothballing its loss-making Belgian refinery. Goldman Sachs expects global refinery utilization rates in 2021-2024 to be 3% lower relative to 2019, heightening competition and eventually resulting in permanent plant closures in developed markets. It adds a “risk weight” to capacities beyond 2021, forecasting a 6 million bpd net capacity increase over the subsequent five years, around 2 million bpd below the International Energy Agency’s forecast.
“[Excess] capacity now looms very large over the industry, posing a direct threat to the outlook for older and more exposed operations,” the IEA said in April. European refining has seen several waves of rationalizations, last within the wake of the 2008-2009 financial crisis.
“In 2023 it could somewhat be that two-thirds of the refineries in Europe don’t make any money, or lose money on a method of accounting,” according to Chemicals and Oil Markets experts at WoodMac. Strong labor unions are making refinery closures in many European countries difficult. Two of Europe’s biggest refiners, Total and Eni, have managed to shutdown some capacity within the past decade, and to show some sites into biofuel operations. Total France, having already converted its La Mede refinery into making biofuels, is considering a second biofuel facility in France.
Capacity on the U.S. Coast, Japan and a few older, less sophisticated sites in Asia is additionally under threat, WoodMac says. “On the U.S. east coast, refiners that process lighter sweeter grades, like Trainer and Bayway, could be in trouble,” according to refinery consultant at Baker O’Brien said. He added that the shortage of access to cheap crude within the northeast was the U.S. region’s “Achilles heel”.
“Less competitive European refineries are in trouble and also the pandemic will put another nail within the coffin for them,” said a refining analyst at consultancy Turner, Mason & Co.
"Even before the pandemic, the IMO was visiting disadvantage some refiners that made lots of fuel that couldn’t afford to form upgrades,” he said.
The International Maritime Organization (IMO) changed the principles on shipping fuel at the beginning of the year in order that all ships can only burn fuel with a maximum 0.5% sulfur, unless they need sulphur-cleaning kits. At least one in every of the Australia’s four remaining refineries could close unless the govt. steps in because the pandemic hits demand, sources told Reuters.
FUTURE GROWTH
Against the backdrop of doubtless shut capacity in Europe over the subsequent few years, other regions are expanding with mega refining projects that are closer to upstream production, as within the Middle East, or closer to big demand centers, like in Asia Pacific. Data and analytics company GlobalData sees Asia Pacific adding 2.7 million bpd of crude distillation capacity by 2024, 42% of the worldwide total the center East and Africa region is anticipated to account for 23% and 18% of crude distillation additions by 2024..
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