By Doris Leblond
PARIS, Feb. 22 -- The imbalance between growing diesel oil consumption and falling gasoline demand in Europe—which especially affects France—will increase under European Union fuels specifications, said Jean-Paul Vettier, president of Total SA's refining division.
Tax differentials favoring diesel automobiles helped increase diesel consumption in France by 3.4%/year since 1996 and reduced gasoline use by 3.1%/year, with a 5% drop registered in 2004.
"For political reasons, there is little chance that taxation will change," said Vettier. Automobile manufacturers have cut their production of gasoline engines. Gasoline accounts for 25% of total fuels consumption in France.
Refiners currently export 20% of their surplus gasoline and import 40% of the middle distillates required to bridge the diesel gap. The imports come mainly from Russia, along with some supplies from Algeria.
Vettier questioned whether Russia will be able to maintain its exports. EU specifications require that the sulfur content in motor fuels drop to 10 ppm by 2009.
Total is building a 500 million euro hydrocracker at its Normandy refinery, due on stream in mid-2006, to produce 1.3 million tonnes/year of diesel and lower the sulfur content. The group also has hydrocrackers at Leuna in Germany and Flessingen in Holland.
"But how many hydrocrackers can a company afford to build?" Vettier said. "We have invested 100 million to 500 million euros to bring our other refineries in France and Europe to standards, but throughout Europe, only 10-15% of refineries can afford such investments, especially if they are not well located and competitive."
French refiners had hoped that an EU directive requiring fuels to contain 2% biofuels by 2005 and 5.75% by 2010 would reestablish a balance between diesel and gasoline.
But the French government required ethanol in gasoline, which is expected to maintain the imbalance between diesel and gasoline.
Oil industry trade group Union Française des Industries Pétrolières (UFIP), said five refiners plan 2 billion euros in refinery upgrade investments during 2005-09. The five are Total, BP PLC, Royal Dutch/Shell Group, Italy's Eni SPA unit Agip, and a unit of ExxonMobil Corp.