Doris Leblond
OGJ Correspondent
PARIS, Mar. 19 -- As the world oil industry faces changes and reflects often-contradictory trends, France's refining industry is coping with its own growing conflicting constraints, said Patrick Haas, president of trade group Union Française des Industries Pétrolières (UFIP), at its annual press conference.
UFIP General Delegate Jean-Louis Schilansky and Haas, who also is chairman and chief executive of BP France, at the conference examined current and near-term prospects for the industry.
They said the industry must constantly undergo mutations as it is pulled along by such conflicting global trends as high but volatile crude prices, consumer countries' development of increasingly "individual" energy choices, the mandatory incorporation of large volumes of biofuels into transport fuels, and growing environmental concerns.
The €3-6/tonne outlays that such changes entail for the industry in France must be met with gross refining margins that fluctuated between €20/tonne in January and €25/tonne in February, down from €35/tonne in 2005 and €26/tonne in 2006. These erratic price levels show that "capacities are increasing in Europe," Schilansky pointed out.
The 12 refineries in France have a stable capacity of 98.8 million tonnes/year, with 87 million tonnes of crude actually processed as of Jan. 1, 2007. That is expected to rise to 95 million tonnes in 2010.
Total SA is the largest refiner, with a total capacity of 53.9-million tonnes/year from its six refineries. Société des Pétroles Shell has three refineries and 17.2 million tonnes/year capacity. ExxonMobil has two refineries totaling 17.2 million tonnes/year, while Ineos—which acquired BP's Lavéra refinery—has a 10.4 million-tonne/year capacity.
France also imported 1.7 million b/d of crude in 2006, with OPEC accounting for 45% of the imports. This makes the country more dependent on OPEC than in 1981, Schilansky noted.
Challenges facing the industry include adaptation to a market in which diesel-powered automobiles account for 49.9% of the pool, a market share that continues to strengthen, increasing by 2.6% last year.
At the same time, unleaded gasoline use in France fell by 5.9%. While 50% of new cars in Europe are diesel-powered, the figure in France is seven of 10. Refiners must adjust by exporting gasoline and importing middle distillates. During 2005-06, for example, about 13.5 million tonnes more middle distillates were imported—a 16% increase—and 6.2 million tonnes of gasoline were exported, a 41% increase.
A further constraint is the need to process heavier and increasingly more-sour crudes while environmental mandates require ever "cleaner" products to be put on the market. During 1990-2009, the sulfur content in diesel oil will have been divided by 200 and in gasoline by 50 (10 ppm on Jan. 1, 2009) as new European directives are applied. The Clean Air for Europe Program requires development of severe hydrogenation technology. "It needs courage to invest," remarked Schilansky.
At the same time, these requirements increase the energy consumed in refineries and the accompanying carbon dioxide emissions. Air emissions of sulfur dioxide (SO2) also have been reduced by one-third and VOCs by more than half. The C02 emission ceilings decided at yearend 2006 are real constraints for new investments, noted UFIP. The challenge for the refining industry must be to save energy and upgrade facilities to compensate for the C02 emissions generated by the manufacture of cleaner products.
The industry is concerned about the national allocation of C02 quotas—the permits to pollute—which the European Commission is rendering more severe for the 2008-12 period. Specifically for France's refineries, the CO2 quotas allocated will fall to 16,541 million tonnes from 19,360 million tonnes for 2005-07, a 14.6% drop. Moreover, the CO2 emissions allocated to French refineries are lower than those for neighboring countries, and UFIP said it doesn't know why.
In a move unlikely to allay industry concern, the EU Heads of State meeting Mar. 8-9 in Brussels made a "binding commitment" to reduce by 2020 greenhouse gas emissions in EU countries by 20% relative to 1990 and by 30% if other industrialized and large emerging countries agree to do likewise. They also decided to increase by 20% the share of renewables in the energy mix (excluding nuclear)—also by 2020—all moves that current EU Pres. Angela Merkel, Germany's Federal Chancellor, had sought.
In addition, the Heads of State also agreed that EU members should ensure that their transport fuel contains at least 10% biofuels by 2020. In this area, France's refining industry is committed to introducing the E85 flexfuel (85% ethanol and 15% unleaded) in 500 service stations by yearend. It is confident it can meet government targets, which are 2 years ahead of European specifications.
The decree setting off the process was just published. Schilansky said achieving the government targets would depend, not on the distributors or the consumers, but whether or not automobiles adapted to flexfuel become available.