Italy’s Eni SPA is planning additional reductions to its Italian refining capacity by 2017 to tackle the growing refining overcapacity in the Mediterranean basin, the company said in its latest quarterly earnings and strategy presentation.
The capacity reduction plan follows poor fourth-quarter 2013 refining margins in the Mediterranean, which fell to less than $1/bbl (down by 81.1% from fourth-quarter 2012) “due to structural headwinds in the industry driven by overcapacity, lower demand, and increasing competition from imported refined product streams,” the company said in its earnings release.
Quarterly results also were affected by narrowing differentials between the price of heavy crudes Eni’s refineries process and the price of European benchmark Brent crude amid reduced heavy crude availability in the Mediterranean region, according to the company.
The capacity reductions are designed to increase the company’s Italian refining utilization to 80% by 2017.
While Eni already has cut its refining capacity by 13% over the last 3 years with downsizing at its Venice and Gela refineries, it plans a further capacity reduction of 22% in the next 3 years, which would reduce the company’s total refining capacity by over a one-third since 2012, Eni’s Senior Executive Vice-President of Trading Marco Alvera said.
Eni’s plans to reduce refining capacity include completing the conversion of its 80,000-b/d Venice refinery at Porto Marghera, Italy, into a biorefinery base for the production of biodiesel (OGJ Online, Sept. 24, 2012), which is scheduled for second-quarter 2014, as well as a capacity optimization project due for completion in fourth-quarter 2014 at its 200,000-b/d Sannazzaro refinery in Italy’s Po Valley.
Eni already shut down gasoline production plants in third-quarter 2013 at its 105,000-b/d Gela refinery on the southern coast of Sicily, according to the company’s presentation.