Refinery Market Small Margins Tighten The Noose on Europe's Refinery Market

Editor: Dominik Stephan

The demise of Europe’s biggest independent refiner puts the continent’s oil market back into the spotlight. While American analyst see the insolvency as a sign of flight of capital from the ‘Old World’, Europe’s remaining refiners might feel relieve in the face of overcapacities and stagnating margins…

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(Picture: PROCESS)
(Picture: PROCESS)

Europe and Eurasia, the second largest refinery market in terms of capacity after Asia–Pacific (BP World Energy Survey) just saw the demise of one of its biggest players: Swiss based Petroplus, operator of five large refineries across the continent, had to file for insolvency last week. After the company had aggressively expanded its operations with credit based acquisitions under former chairman Thomas O’Malley, a low demand for oil and petroleum products as well as debts of about € 1.7 billion broke its neck.

Falling Throughputs and Overcapacities

Now some analysts in America see the insolvency as a sign of flight of capital from a struggling European economy, the true course of the Petroplus demise lies deeper: Europe’s refinery market suffers from overcapacities. As the Statistical Review of World Energy by British oil–multinational BP shows, a total capacity of 24,516,000 barrels–per–day was installed in Europe and Eurasa in 2010, Accounting for 26.7 percent of the global refining capacity. Most of this capacity was installed in Russia (5,555,000 barrels daily), Italy (2,396,000 barrles/day) and Germany (2,091,000 barrels/day). Despite these impressive figure, it is a shrinking market: The throughput of refineries in Europe and Eurasia has fallen by 13 percent in the past twenty years (from 22682 thousand barrels/day in 1990 to 19664 thousand barrels/day in 2010).

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