REFINERY NEWS ROUNDUP: European refineries expect better margins in 2021

London — Refining margins remain weak in Europe but the region's refiners are expecting some improvement over the course of the year.

Portugal's Galp is forecasting a recovery in its refining margin to between $2/b and $3/b for the full year 2021 from a margin of $1.10/b in 2020, and closer to the 2019 level of $3.10/b, assuming a Brent value of $50/b.

Spain's Repsol expects an average $3.50/b benchmark refining margin for 2021, which would be a 59% increase from 2020. A small recovery has been evident in recent months, CEO Josu Jon Imaz said Feb. 18. With domestic fuel demand dropping 19% year on year, throughput at its refineries fell 18% year on year to 35.9 million mt, while its refining margin contracted 56% to $2.20/b. Nonetheless, Repsol managed to make a $0.60/b premium to the benchmark, Imaz said, due to a combination of cheaper feedstocks, resilient demand and global supply constraints.

Italian refiner Eni's margins averaged $1.70/b last year, down 60% from $4.30/b in 2019. Margins in Q4 2020 were "unprofitable", averaging $0.2/b compared to $4.20/b in Q4 2019. The margin drop was "driven by a materially lower demand for fuels, which was hit by the pandemic crisis affecting economic activity and travel, against a backdrop of overcapacity, competitive pressure and high inventory levels." Margins were further dented by the narrowing spread between sour crudes such as Urals versus light sweet due to OPEC+ cuts. Eni's total refining throughputs of 23.89 million mt in 2020 compared with 26.35 million mt in the previous year. Utilization rates were down as crack spreads for products declined "to multi-year lows." The company reported average utilization rates across all of its refineries at 69% in 2020, down from 88% in 2019, and at 74% in Q4, down from 85% a year earlier. Throughput at its Italian refineries was 14.82 million mt in 2020, down 28% on the year. Q4 throughput was 3.93 million mt, down 19% on the year-ago quarter.

Greek refiner Hellenic said that Q4 refining margins improved versus Q3 but remain "very weak", with product cracks remaining "close to historical lows". In Q4, the Mediterranean fluid catalytic cracker benchmark margin averaged $1/b, compared with $1.6/b in the year-ago period, while the hydrocracking margin was minus $0.10/b, compared with $6.6/b in Q4 2019. In 2020, the Mediterranean fluid catalytic cracker benchmark margin averaged $1.3/b, compared with $3.3/b in 2019, while the hydrocracking margin was $1.9/b, compared with $4.1/b in 2019. Hellenic's three refineries ran at an average 86% utilization rate in Q4, compared with 88% a year earlier. Despite the planned turnaround at Aspropyrgos and the impact of COVID-19, the group's refineries "maintained high production levels" and recorded 11% higher exports in 2020 "at a time when many refineries in the Med region and globally, were forced to either curtail or shut down production runs."

Hungary's MOL reported total throughput of 3.97 million mt in Q4, down 15% year on year. It was MOL's lowest quarterly throughput in a decade, owing to the shutdown at Rijeka, and to lower fuel demand thanks to COVID-19 movement restrictions across Europe.

** The strike at France's Grandpuits refinery was called off in mid-February but only temporarily, a source from the CGT labor union told S&P Global Platts. Strikes started in October when staff protested over the company's plans to convert the refinery into a bio plant and potentially cut jobs. The latest strike started in late December and was extended on Jan. 6 and subsequently until mid-February, even though Total has said there will be no compulsory redundancies, and that employees whose jobs disappear will be offered another role within the company in France. However, the CGT union said that it had not signed the social plan due to lack of progress regarding the situation with employment and that it will continue to keep the company under pressure so that jobs are saved. In September, Total said it would convert the refinery into a biofuels and plastics recycling complex, ending crude refining at the site in early 2021. The refinery has been fully offline since late January. Total halted the crude distillation unit at Grandpuits Nov. 16 but the other units at the refinery had previously remained in operation. The refinery is unlikely to restart prior to being converted, the source said.

** Eni is evaluating conversion of its Livorno refinery in northwest Italy into a biorefinery, as part of the Italian company's wider strategy to make its activities more environmentally sustainable, a company spokesperson said. Eni has already converted two of its Italian refineries and is looking to almost double its biorefining capacity to around 2 million mt/year by 2024, and expand this to at least five times by 2050, as part of its pledge to achieve complete carbon neutrality by 2050.

** Portugal's Galp said in a regulatory filing Dec. 21 it will discontinue refining operations at the Porto refinery from 2021 and concentrate its core refining activities and future developments at its larger Sines refinery. Galp said it will focus on enhancing the resilience and competitiveness of the Sines site, with a view to improving efficiency and to integrate the production of advanced biofuels and other cleaner as well as more valuable products. The Porto refinery, which came on stream in 1969, halted fuel production for a second time last year on Oct. 10 due to the impact of COVID-19 on fuel demand and high inventories. At present, the site will remain a logistics hub, but the company will assess other ways to use the facility. The company intends to shift its entire refining operations to the larger 220,000 b/d Sines refinery, where it has an FCC and a hydrocraker. Under normal market circumstances, the moving of operations to the larger refinery would be equivalent to about a $1/b increase in refining margin, according to CFO Filipe Silva. The company said it expects the utilization rate at Sines, to reach 90% in 2021, which would mean 80.3 million mt processed. This would be a decrease of around 8% from the total 87.1 million mt processed in 2020, which includes volume from Matosinhos.

** France's Donges refinery is not expected to restart before mid-March although with potential new lockdown in France the restart could be postponed further, a source from the CGT union said. Total said Nov. 24 it was to halt operations at Donges from Nov. 30 for the coming months for economic reasons, due to weak margins, in the wake of the demand slump caused by the coronavirus pandemic. The refinery has been operating at a loss, it said. At the time trading sources suggested that the refinery was likely to restart in January.

** Petroineos said that it was continuing consultations with employees, which started on Nov. 16, regarding its proposal to reconfigure the Grangemouth refinery in Scotland "to meet current and future anticipated demand" for fuels. The company proposes a smaller refining operation at Grangemouth and plans to mothball CDU1 and the FCC, two units that "have been closed throughout the COVID-19 pandemic due to significantly reduced local and international demand for fuels".

** One of the two distillation units at Cepsa's La Rabida is currently idled but set to quickly resume operations if demand improves, the company said. Fuel unit 1 and and Vacuum Unit 2 have been offline since they concluded maintenance in Q4 2020.

** Croatia's Rijeka refinery will optimize its operations from November "for a few months" and during that period will "perform regular technological activities at process units such as catalyst regeneration and preparation of these plants for the new processing cycle in 2021 through regular maintenance work."

** Finland's Neste said it will shut down its Naantali refinery by the end of March as part of its restructuring. Operations at its Porvoo refinery will be revamped to focus on co-processing renewable and circular raw materials. It will focus the Naantali site on terminal and harbor operations and in the second phase of restructuring will develop the Porvoo refinery "towards co-processing renewable and circular raw materials." ** Gunvor Group said it would mothball its Antwerp refinery, but "will continue terminal activities, as well as further assess future development opportunities for the land and existing units." The refinery stopped crude processing at the end of May.

** Shell has relaunched the sale of its Fredericia refinery in Denmark after suspending the sale in 2018.

** Prax Group announced that it has successfully completed the acquisition of UK Lindsey refinery and its associated logistic assets in the United Kingdom. In July 2020, Total agreed to sell its 5.4 million mt/yr (108,000 b/d) Lindsey refinery in the UK to fuel trading and marketing Prax Group, as the French oil major focuses on its integrated downstream assets and the coronavirus added to the uncertainty over long-term demand for fuel.

** At Spain's Bilbao the FCC was taken offline in April, and the company has not commented on its restart. At Spain's Tarragona, the refinery is online with units adapted to market conditions. The smaller crude unit (Crude 2) has been used as a swing unit to allow more flexibility.

** Germany's Heide refinery will reduce its staff by 106 positions following "intensive and constructive negotiations" since the end of October, the refinery said Jan. 28. "The ongoing global expansion of renewable energy and the effects of the current coronavirus pandemic have led to a sharp drop in demand for mineral oil products," the refinery said, adding that it had faced decline of product sales "for almost a year", while "the ongoing energy transition is leading to major challenges for the company in future." It said however that it will be "well positioned for the future" with the agreed downsizing and "by changing its business model towards the future production of green hydrogen."

In other news, Turkey's STAR refinery last year exceeded its design capacity of 10 million mt (200,000 b/d ) of crude throughput, processing 10.5 million mt (211,000 b/d), Socar's Turkish subsidiary Socar Turkey said Feb. 15 in a statement. Socar said that it had achieved the increase by adapting its production plan to the changing conditions brought by the global COVID-19 pandemic. Socar said that the refinery's sales for 2020 were about 10.3 million mt, of which 70% went to the Turkish market. According to Anar Mammadov, the president of Socar Turkey's Refinery and Petrochemicals Business Unit, the increase was due to "effective production planning and optimization processes." "We were able to rapidly convert our jet fuel production capacity, demand for which was reduced due to the pandemic, into diesel and continue uninterrupted production," he said explaining that due to this the refinery was able to increase its crude throughput over the second half of 2020. Commenting on the refinery's investment plans Mammadov said that Socar would invest $45 million this year in improving the refinery's flexibility, operability and profitability dubbed as the IFOP project. Other ongoing investment in the plant, mostly geared to increasing storage capacity, would total $600 million by 2022, he said. In 2019, Socar announced plans to increase its storage capacity to 2.5 million cu m. The plant currently has storage capacity for 944,000 cu m of refined products and 656,000 cu m of crude.

Romania's Rompetrol said its Petromidia refinery operated at 72% utilization in 2020, down by 25 percentage points, due to the general situation but also the planned maintenance in March and April. Rompetrol Rafinare "managed in 2020 to protect and maintain its production units - Petromidia Navodari and Vega Ploiesti refineries, the petrochemical division, in the context of the negative impact generated by the COVID-19 pandemic," it said in its financial report. The net refining margin recorded by Petromidia was minus $11.2/mt, compared with a positive value of $13.70/mt in 2019. Vega operated at 110% utilization, due to "obtaining products with high added value, such as bitumen, a product necessary for infrastructure works in Romania." In 2020, Petromidia processed 4.864 million mt raw materials, down from 6.331 million mt in 2019. The Vega refinery processed 364,000 mt, down form 436,000 mt in 2019.

Meanwhile, demand for oil products continues to be negatively impacted by various restrictions across Europe.

French road fuel deliveries in January 2021 fell 15.4% on the year to 3.393 billion liters, with a 14.4% drop in diesel consumption compounded by a 18.7% drop in gasoline consumption, according to industry group UFIP, citing data from the country's oil industry committee CPDP. While there is currently no lockdown in France and schools are open, the government has put in place various mobility restrictions to prevent an increase in coronavirus cases, notably a 8pm curfew which was brought forward to 6pm (until 6am) on Jan. 16. Moreover, all cafes, bars and restaurants are closed since Oct. 28 and many office workers are working from home at least one or two days per week.

Italy's demand for refined oil products in January 2021 slumped 22.6% to 3.7 million mt compared with the same month in 2020, industry group Unione Energie per la Mobilita', UNEM, said an a statement containing the data. "The contraction was wider than initially estimated," UNEM said in the statement. "It is the worst result since the first lockdown ended last year, both in terms of overall oil product consumption and in terms of automotive consumption," it said.

NEW AND ONGOING MAINTENANCE

FUTURE MAINTENANCE

Near-term maintenance

New and revised entries

** Germany's Bayeroil is planning short maintenance at its Vohburg and Neustadt sites. At the Vohburg site works are lasting between Feb. 25-Mar. 14 and include one of the two crude distillation units, as well as a catalyst change at the gasoline and middle distillate hydrotreater. Separately, the Neustadt plant will carry out short works in March. Bayernoil consists of the Vohburg and Neustadt sites which are closely interconnected.

** Poland's second largest refiner Grupa Lotos said that it will partially shut its Gdansk refinery Feb. 26 to perform scheduled maintenance. "For the first time the maintenance project will be performed in the form of a partial shutdown (its second part will take place in spring 2022). In accordance with the plans, the shutdown in 2021 will not involve a stoppage of the entire refinery," the company said in a statement. Lotos said the refinery will continue to process crude oil and dispatch products throughout the maintenance period, which will be completed on May 1. Lotos said 19 of the refinery's more than 60 units will be shut in 2021, most of which will resume operation in early April. The last work will be performed on "three systems of the oil unit," starting April 7. Lotos said the maintenance will reduce the refinery's throughput capacity in 2021 by an estimated 5%.

** ExxonMobil's Rotterdam refinery is planning works in March, according to market sources. The duration or the extent of works was not confirmed.

** Italy's Sarroch refinery is undergoing partial works, according to market sources. The company declined to comment but in its latest financial report in November 2020 said that it would lower maintenance costs over the next two years as all but essential upgrades are delayed beyond 2022.

** The FCC unit at Portugal's Sines refinery is offline, which would reduce VGO imports, according to market sources.

** Turkey's Izmir refinery is expected back in March, according to market sources. In early December, Tupras said that it would halt production at Izmir between Jan. 1 and Feb. 28 for maintenance. In its recent financial report the company said that a revamp and opportunity maintenance is ongoing on five units at the Izmir refinery during Q1. The company also said work on the Crude and FCC units will take nine weeks, on the CCR and Isomerization units 10 weeks and on the desulphurizer 11 weeks.

** Hungary's MOL is planning a "more intense" maintenance schedule in 2021 than it carried out in 2020, the company said. That will include ongoing works at the Rijeka refinery that started in November, as well as smaller shutdowns of various units at the Bratislava and Danube refineries up to September. Rijeka has previously said it would be optimizing its operations from November "for a few months" and during that period will "perform regular technological activities at process units such as catalyst regeneration and preparation of these plants for the new processing cycle in 2021 through regular maintenance work."

** API's refinery in the Italian coastal town of Falconara Marittima is fully operational after routine maintenance and upgrades have been completed, sources said in late February. The plant has been offline since mid-January when the works started, though it has still been shipping refined products from storage via tanker trucks, as well as refined products coming in via sea routes to the complex.

** Spain's Petronor said Feb. 19 it would halt the hydrodesulfurization unit HD3 from its Plant 2. The company has previously said that it would halt its G4 diesel desulfurization unit from Feb. 13, alongside its Hydrogen unit (H4) and sulfur recovery plant (SR5) for maintenance. The restart of the units will be from March 15. The refinery halted its number 2 crude distillation unit on Nov. 20, 2020 in reaction to weaker market conditions. The halt has affected 40% of the refinery's crude distillation and also includes the visbreaking unit. The FCC was taken offline in April, and the company has not confirmed its restart.

** All units at France's Grandpuits refinery are now fully offline as a result of a strike which has meanwhile been called off. Total halted the crude distillation unit at Grandpuits Nov. 16 but the other units at the refinery had remained in operation. All units are now halted and product deliveries have also stopped. Work to prepare the dismantling of the refinery has been halted.

** The ISAB refinery in Sicily has returned its North plant fully online as well as part of its Southern plant following a maintenance cycle that began in October, sources close to the refinery told S&P Global Platts on Feb. 15. The refinery's southern plant is still partially offline and its IGCC Cogen unit is currently offline, the sources said. The IGCC unit will likely be offline at least until April, and may be kept offline further depending on market conditions, the people added. ISAB was originally scheduled to return to operations on Dec. 15 when it was due to restart after the completion of a two-month maintenance cycle that began on Oct. 15. The restart was then postponed to February due to market conditions, barring the IGCC unit which already in December was slated to be kept offline at least until April.

** France's Gonfreville refinery has restarted a unit which could result in flaring and noise, the refinery said on the Allo Industrie site late February. The refinery had halted a diesel hydrtotreater mid February, S&P Global Platts has reported previously. Meanwhile, the CDU, which was damaged in December 2019 following a fire at a pump feeding crude oil, remains offline and the restart is unclear, according to trading sources.

Existing entries

** A diesel hydrocracker at Germany's Gelsenkirchen refinery is currently offline, trading sources said Feb. 8. The company declined to comment. The Scholven part of the refinery carried out maintenance into early January. The refinery consists of the Horst and Scholven sites, with Horst representing around one-third of total capacity.

** Shell's Pernis refinery in the Netherlands said in early February that flaring is possible during works on an unspecified unit in the coming weeks.

** General maintenance at Germany's Leuna will be carried out in May and June 2021, the company said. The maintenance and an upgrade had been scheduled originally for last autumn but have been postponed "due to the ongoing pandemic and the resulting restrictions on travel and transport of goods, as well as the impact on international supply chains", the company said previously. The maintenance had previously been planned to take place over six weeks. Total said in 2019 it would invest Eur150 million ($166 million) in the Leuna refinery over 2020-21 to reduce production of heavy products as demand decreases, and increase production of methanol, a key feedstock for the chemical industry. The project will deepen the integration of refining and petrochemical operations and increase the competitiveness of the plant, Total said at the time.

** Germany's Mineraloelraffinerie Oberrhein (Miro) will carry out a planned turnaround, starting in mid-February and lasting six weeks until the end of March, the refinery said. Previously trading sources said the maintenance would start in February and run until April. Last year the refinery said that it was planning major maintenance in 2021.

** Tupras announced its maintenance programme for the first quarter. At the company's Batman refinery ongoing maintenance on the crude oil and vacuum unit which started in Q4 last year is expected to take seven weeks into Q1 of 2021, the company said. At the Izmit refinery planned periodic maintenance of the desulphurizer is expected to take four weeks during Q1 and planned revamp of the FCC unit for 30 weeks, but did not indicate when in Q1 work will commence.

** In 2021, Neste plans to carry out around major maintenance in the second quarter at the Porvoo refinery lasting around 12 weeks. The maintenance work was originally scheduled for 2020 but was deferred due to COVID-19.

** UK's Pembroke refinery is starting planned maintenance, according to market sources. The works are set to last until April.

** France's Donges refinery is not expected to restart before mid-March although with potential new lockdown in France the restart could be postponed further, a source from the CGT union said. Total said Nov. 24 it was to halt operations at Donges from Nov. 30 for the coming months for economic reasons, due to weak margins, in the wake of the demand slump caused by the coronavirus pandemic. The refinery has been operating at a loss, it said. At the time trading sources suggested that the refinery was likely to restart in January.

** The Milazzo refinery located on the Southern Italian island of Sicily is currently running maintenance on some units ahead of placing its LC Finer unit offline in scheduled wide-scale upgrade works at the plant in the first quarter of 2021, a source close to the refinery said. No information was available on which units were involved in the works, or if the production output was affected. There was also no information available on the duration of the maintenance. The upcoming wide-scale maintenance that included the LC Finer unit being placed offline was originally scheduled for 2019 and postponed various times.

** One of the two distillation units at Cepsa's La Rabida is currently idled but set to quickly resume operations in case of demand improvement, with Cepsa continuing to adapt the refinery utilization ratio to current demand, the company said Jan. 14. Fuel unit 1 and and Vacuum Unit 2 have been offline since they concluded their last maintenance in the fourth quarter.

** Two planned maintenances at the Castellon refinery is eastern Spain have been pushed back, with no fixed date for when they will now go ahead. The first was previously scheduled for May and to last two to three weeks, affecting two distillation units, the powerformer 1 and the HVN. A second maintenance, initially due for November for two to three weeks, affecting one conversion unit (treatment plant) and the 1.4 million mt/year coker, has been pushed back into 2021.

** Eni's Sannazzaro de Burgondi refinery in northern Italy started another cycle of maintenance and upgrade works, even as a decision on when to reactivate its Eni slurry technology (EST) unit, which has been offline since a 2016 fire, is still outstanding. The works being carried out are not the series of works planned for the EST unit that had previously been suspended.

** The Canary Islands' only refinery on Tenerife will be permanently closed in the long term. There has been no production since 2014. Cepsa will install some logistics and storage facilities at the site, amid a wider regeneration project.

Future

New and revised entries

** Poland's second largest refiner Grupa Lotos will carry the second part of the maintenance at its Gdansk refinery in the spring of 2022.

** Lukoil's Neftochim refinery in Burgas, Bulgaria, which had scheduled out major works for this year, has postponed them, according to sources close to the matter. The refinery typically carries out works in February and March but has deferred them to later in 2021, possibly during the second half of the year. The works are expected to include atmospheric vacuum unit 1, atmospheric vacuum unit 2, atmospheric vacuum distillation 2, FCC, hydrotreatment, hydrocracker, according to company tender documents.

Existing entries

** France's Lavera refinery is planning works at its FCC unit in September.

** Austria's OMV said it will expand and modernize the cracker units and petrochemical cold section at its Bughausen refinery in Germany with the upgraded units planned to go live in Q3 2022, following a planned turnaround of the refinery.

** Czech Unipetrol said that following the turnaround at its Litvinov plant in Q2'20 the refinery has prepared production for a new four-year cycle. Thus the next turnaround is due in 2024.

** With its 2020 maintenance, Romania's Petromidia and the petrochemical division "will align with the new operating strategy, with a general turnaround scheduled for 4 years and technological shutdowns scheduled for 2 years," the company said.

** Two months of maintenance at the Sarpom refinery in Trecate, Italy, originally scheduled for October 2019 have been pushed back to 2021. Details on which units at the refinery will be upgraded as part of the maintenance -- of the kind needed every 3-4 years -- had yet to emerge.

** The Holborn refinery near Hamburg, northern Germany, plans its next turnaround in 2023. Its previous maintenance was in the autumn of 2018. The refinery carries out major works every five years.

** The next major turnaround at Preem's Gothenburg refinery in Sweden will be in 2021.

** Romania's Petrobrazi will undergo its next big turnaround in 2022.

** Total's Feyzin is considering mothballing a visbreaker unit around 2021 as demand for heavy fuel is gradually declining and the unit works on average no more than three days a month. As a result of the mothballing seven people would lose their jobs, but would be offered other jobs within the organization, the company said.