The planned merger by three U.K. downstream companies that is to spur closure of a refinery will not solve the U.K.'s gasoline surplus and middle distillate deficit problems.
This is the view of Wood Mackenzie Consultants Ltd., Edinburgh, which has analyzed effects of a decision by Elf Oil (U.K.) Ltd., Gulf Oil (Great Britain) Ltd., and Murco Petroleum Ltd. to join forces. The combined company will keep operating Elf's 108,000 b/d capacity refinery at Milford Haven, South Wales, and close down the 115,000 b/d capacity Gulf refinery nearby (OGJ, Nov. 11, p. 40).
Wood Mackenzie reckons the combined companies' retail volumes in 1995 totaled 32,800 b/d of gasoline and 7,140 b/d of diesel, or about 7.6% of the U.K. retail market. The analyst said their total 1995 inland sales, including commercial and wholesale sectors, totaled 47,600 b/d of gasoline, 19,080 b/d of kerojet, 50,800 b/d of gas oil/diesel, and 3,440 b/d of fuel oil: "The output from the Elf refinery is more than sufficient to cover retail volumes."
However, excluding exports, the balance against overall inland sales gives deficits of 13,020 b/d of gasoline, 6,420 b/d of kerojet, and 19,280 b/d of gas oil/diesel and a surplus of 16,760 b/d of fuel oil.
Wood Mackenzie said the inference is that the new company will either buy additional products, set up a processing deal elsewhere, or back out of the commercial and wholesale business.
"Gulf, for example," said Wood Mackenzie, "is known to have historically been a major gasoline supplier to hypermarkets, while Elf has entered this business to a greater extent in recent years. In addition, Gulf has traditionally been a major player in the commercial gas oil/diesel market. It may be that the new company is looking to shed volumes in these areas."
Closure of the Gulf refinery will leave U.K. with a 60,000-80,000 b/d gasoline surplus, aid Wood Mackenzie, vs. a 110,000 b/d surplus in 1995.
By 2000, the analyst reckons the U.K. will have a slight middle distillates deficit, due to growing demand for diesel and kerojet. By 2005, the deficit is expected to reach 90,000 b/d.
"It is likely that the U.K.'s remaining 10 refineries will see some capacity increase," said Wood Mackenzie, "but it will be insufficient to meet the growing middle distillates deficit. Ireland will be particularly affected by closures, as Milford Haven refiners are a major supplier to this market."
In 1995, Ireland imported about 72,000 b/d of products from the U.K., or 60% of total demand. Virtually all of this product came from the U.K.'s west coast refineries.
