Creation of a single market in Europe is not likely to cause many significant changes in most of the European petroleum market.
The one exception is Spain, where for almost 60 years the state distribution and marketing industry enjoyed a lucrative monopoly and the mixed state and privately owned refining sector operated without competition from foreign companies.
Spain was a latecomer to the European Community. One of the conditions of its entry was dismantling of state oil monopolies. The process has started, although it is not moving as quickly and effectively as bureaucrats at EC headquarters in Brussels would like.
THE NEW SITUATION
Opening of the Spanish market has created a new situation for Spanish refiners. To survive in a European-style free market they have no alternative but to streamline and expand their operations.
Coming to terms with a free market is not easy after living so long under the comforting umbrella of state protection. But reality is creeping up fast.
Almost monthly foreign oil companies announce plans to enter petroleum marketing in Spain or enter joint ventures in processing. Newcomers aim to take at least 15% of the Spanish market by 1993.
However, there is a growing mood of confidence among Spanish downstreamers that they will be able to compete in the single market of the 1990's.
Local companies have a number of advantages over foreign ones, notably their historic and detailed knowledge of the Spanish market and a good transportation system. Domestic companies are taking comfort from the fact that it takes time as well as money for newcomers to acquire this sort of experience.
Taking on foreign entrants will, however, cost millions. According to Spanish industry estimates, domestic companies will need to invest about $1.4 billion during the next 5 years.
The funds are required to upgrade facilities, increase the range of products, install and improve antipollution systems to meet European standards, and expand marketing networks in Spain and abroad.
That will be in addition to the $2.3 billion the Spanish refining industry has spent during the last 10 years to improve its operations.
There are six refining companies in Spain operating 10 refineries with a combined capacity of about 1.24 million b/d. All but two of the refineries are on coastal sites.
Catalytic cracking capacity at these sites is about 220,000 b/d. Total capacity utilization rate is about 80%.
CONCENTRATED OWNERSHIP
Although the market is being decontrolled, the ownership of processing units is still highly concentrated. Most of the capacity is in the hands of two companies.
State owned Repsol SA controls two of the refining companies, Repsol Petroleo SA and Petroleos del Norte, which between them have 720,000 b/d of capacity or 58% of the total figure. Second in the league is Cia. Espanola de Petroleos SA, which has 290,000 b/d or 23% of the total.
Copyright 1990 Oil & Gas Journal. All Rights Reserved.
