Refiners in Europe, N. America May Shut 11% Capacity By 2013
August 18, 2010

Refiners in North America and Europe could shut down a combined 4.3 million barrels a day, or nearly 11%, of refining capacity by 2013, according to Vienna-based consultancy JBC Energy.

Industry consolidation is likely to hit Europe the hardest through 2011, JBC Energy said in a report. The outlook for the continent's refiners is poor given waning gasoline demand from North America and increased competition from diesel producers in Russia and Asia.

"With cracking margins hovering below a hardly profitable $2 a barrel and demand expectations for the next years being bearish, there is still a list of European refineries likely to either be mothballed or even shut down in the near future," JBC said.

The consultancy forecasts 2.5 million barrels a day of unprofitable refining capacity will need be shut down in Europe by 2013, assuming refinery utilization stays at an average 82%, JBC says. The shutdown would account for 14% of Europe's crude distillation capacity.

Separately, North American shutdowns of around 1.8 million barrels a day are required by 2013 to balance out the market, assuming refinery utilization averages 86%. The closures would reflect an 8% reduction in North America's distillation capacity.

JBC's forecasts are more pessimistic than estimates from the International Energy Agency, the energy watchdog for the Organization for Economic Co-operation and Development.

The IEA expects OECD refiners to close1.4 million barrels a day of refining capacity through 2011.

"We expect this figure to increase as refiners continue to react to poor economics and further closures are announced," the IEA said in its medium-term oil market report in June.

In the long term, refining capacity could drop more sharply in North America and Europe, JBC said.

By 2020, Europe's refining industry could shed 3.1 million barrels a day, or around 17%, due to the widespread use of fuel-efficient vehicles in the region.

"In North America, however, the long term savings potential is still much higher due to a currently relatively inefficient vehicle fleet composition, resulting in a potential 4.2 million barrels a day of capacity taken offstream" by 2020, or around 19%, JBC added.

JBC's latest closure estimates have been revised down from forecasts reported in November 2009.

Source: Dow Jones Newswires

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