Major oil companies are reviewing their refining and petrochemicals operations in France, with a view to meeting new fuels specs, improving efficiency, and cutting costs.
Among the changes planned are:
- Upgrades of two refineries operated jointly by BP France and Mobil Oil Française, to prepare for approaching changes in European Union fuel specifications.
- Cost-cutting in BP Amoco plc's chemicals business, to include layoffs, divestments, and possibly a plant closure.
- Plant expansions and integration of refining and petrochemicals operations by Esso SAF.
BP-Mobil refiningThe BP-Mobil European refining joint venture is investing 290 million francs this year to improve performance at the Lavera and Notre-Dame-de-Gravenchon refineries. These plants are "particularly well situated to clear the hurdle of (Year) 2000 specs," said Michel de Fabiani, president of the Europe region for BP Amoco plc, and president of BP France.
At Lavera, 100 million francs will be spent to debottleneck the fluid catalytic cracking (FCC) unit to increase LPG production-especially the propylene cut used in the Lavera petrochemical complex. LPG output will increase to 350,000 metric tons/year from 220,000 tons/year.
The revamp will use FCC technology developed jointly by M.W. Kellogg Co. and Mobil Corp., and the engineering will be done by Foster Wheeler Corp., Clinton, N.J.
An additional 100 million francs will be spent on general improvements at the refinery.
Last year, the 10 million ton/year Lavera refinery was operated at full capacity. But de Fabiani indicated that the group is still "open to discussions" of potential partnerships regarding the refinery.
At Notre-Dame-de-Gravenchon, 60 million francs is earmarked to add a splitter to reduce the benzene content of motor fuels. The work is being done to prepare for reduced benzene limits, to 1 vol % from 5 vol %, under EU fuel regulations due in January 2000.
A new fractionation column will be built to extract the benzene-rich cut. Construction and engineering will be done by Jacobs-Serete, a combine of Jacobs Engineering Group Inc. and Serete Industries (Serete is owned 49% by Jacobs).
A further 30 million francs will be spent this year on the Notre-Dame-de-Gravenchon refinery.
BP Amoco chemicalsBP Amoco is pursuing cost-cutting at its Lavera chemicals complex. And, to cope with the low petrochemicals cycle that is expected to last 3 years, the company is conducting a strategic review of its various petrochemical businesses.
BP Amoco is "revisiting" its research activities. And, in late March, it sold the majority of its worldwide antifreeze business to Belgium's Ineos NV.
In addition, BP Amoco will soon sell its polyethylene glycol (PEG) business. BASF AG was reported in the European press recently to be planning to buy the PEG business.
The fate of polyisobutene production at Lavera could also be hanging in the balance because, out of four BP Amoco sites, one has to be shut down, says the company. The Lavera site has a good chance of being maintained, however, according to BP Chemicals SNC Chief Executive Jean-Fran?ois Rogeau.
The company's cost-cutting measures are aimed at reducing outlays by 50 million francs/year from 2001 on. Under the plan, it will reduce staff at the Lavera site by about 120 out of a total of 620. This includes its Naphtachimie steam cracker joint venture with Elf Atochem.
The Naphtachimie affiliate has been asked to cut costs by 20%, but BP Amoco left it to the joint venture to decide how to go about it.
BP Amoco will spend 150 million francs to achieve the cost cuts. It says 15-25 people will be laid off in order to reestablish the so-called age pyramid. Ninety-nine additional jobs will be cut, mainly in the research and technology divisions at Lavera. In research alone-which employs 232-57 layoffs are expected.
The research unit was a major part of BP Chemicals' overall research program and the main center for the polyethylene gas-phase technology, bringing in profits of 15 million francs/year on sales of 220 million francs. In March, BP Amoco Chemicals in London gave notice that its service contract with the Lavera research unit would end in December 1999.
The Lavera management is striving to retain the research unit and will spend 30 million francs of its 150 million franc investment to improve the unit, as well as the quality control laboratory.
Rogeau explained that the job cuts were warranted by major earnings reductions created by a difficult market context in which petrochemical and refining margins are squeezed, and by the BP Amoco merger. He also said a "social plan" would make the layoffs as painless as possible, and that they would be carried out through early retirement, voluntary departures, and transfers within or outside the group.
Not linked to cost-cutting but to strategy is BP Amoco's plan for Appryl, the polypropylene (PP) joint venture formed by BP Chemicals and Elf Atochem. Appryl has PP production of 700,000 metric tons/year at two sites: Lavera and Gonfreville, France. A new unit at Grangemouth, Scotland is slated to begin producing by the end of this year.
To the BP Amoco joint venture, Amoco brought 800,000 tons/year of PP capacity in the U.S. and 400,000 tons/year at Geel, Belgium, bringing BP Amoco's total PP capacity to 1.9 million tons/year.
BP Amoco neither wishes to sell its Geel complex nor pull out of Appryl. It has therefore begun discussions with Elf Atochem aimed at possible formation of a global PP joint venture, either encompassing the full BP Amoco PP capacity or only the European capacities.
BP Amoco is also mulling an expansion of its 700,000 ton/year Lavera ethylene complex to 1 million tons/year.
Esso processingEsso SAF launched studies in August last year for what President Jean-Luc Randaxhe described as a major project involving oil and petrochemicals.
One project, worth 3 billion francs, would adapt the Port-Jerome refinery to EU 2005 specifications; the other, also for 3 billion francs, is for expansion of Exxon Chemical's petrochemical plant at nearby Notre-Dame-de-Gravenchon.
This project is competing for investment dollars with similar projects being studied for other Exxon sites in Europe, namely Antwerp, Rotterdam, and Fawley, U.K. A decision in principle is expected in 2000, and the investment determination in 2001, with start-up envisioned for 2003-05.
Each of the French projects is separate, explained Randaxhe, but they would overlap, as there are strong synergies between Port-Jerome and Notre-Dame-de-Gravenchon. If the petrochemical project were the only one to proceed, then the extra feedstock needed could be imported, he said.
Randaxhe added that the Port-Jerome study is not taking into account the pending Exxon-Mobil merger. At this stage, he said, "no one knows how the merger will affect operations in France."
Esso has just spent 150 million francs on its Fos-sur-Mer refinery in southeastern France. The refinery was taken off-line in January and February for a thorough revamp and maintenance program in preparation for the Year-2000 specifications, reduction of benzene and sulfur content in gasoline, and reduction of sulfur content in diesel. The FCC regenerator was changed, an expense not included in the 150 million franc figure.
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