UFIP chief: French refining industry situation ‘critical’

Doris Leblond
OGJ Correspondent

PARIS, Feb. 5 – The French refining industry faces a “critical” situation as part of a European system in which “between 10 to 15% of the 114 refineries should be shut down to restore a demand-supply balance,” says the leader of a trade group.

Jean-Louis Schilansky, president of Union Francaise des Industries Petrolieres (UFIP), gave that assessment at a press conference Feb. 4 in Paris.

In an industry outlook, Schilansky noted that demand for oil products in France last year dropped by 2.8% in a change he called “structural.”

Refinery runs for all of last year fell to 72 million tonnes from 84 million tonnes in 2008 as margins diminished.

Schilansky said gasoline exports fell by 17% last year, while gas oil imports grew by 38%. Average gross refining margins fell to €15/tonne from $23/tonne during 1995-2008.

Since March 2009, Schilansky added, the French refining industry has lost €150 million/month.

With a planned storage hub at the Marseille-Fos port targeting capacity of 1.1 million cu m and 80,000 cu m becoming available at the Fos Oil Depot, French refiners face growing competition from abroad.

As explained to OGJ by Esso SAF's Head of Communications and External Relations Jean-Francois Dussoulier, this means that the much cheaper products from refineries abroad will be able to compete with France's more expensive products.

"This is already happening", he said, pointing to the rise in diesel oil imports.

Adding to problems of France's refining industry are potential costs of European Union and French regulatory initiatives, "which will render more fragile the more vulnerable installations," Schilansky said.

Changes to the EU's emissions trading system in 2013 will add an estimated €2.0/tonne to the cost of processed crude if carbon allowances cost €30/tonne. And the Industry Emissions Directive (IED), which requires replacement of heavy fuel oil used in refineries by gas, should add €2.5/tonne. Investment required by the change will be about €1 billion.

And France has imposed requirements that so far have not been adopted elsewhere estimated to add costs of €100 million over 5 years and afterwards €25 million/year.

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