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REFINERY NEWS ROUNDUP: Confidence improves in Europe, but challenges come from gas prices

Business confidence is improving in the European refining sector, with oil companies in the region reporting higher margins amid downstream recovery, although high natural gas and hydrogen prices are starting to pose problems.

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Austria's OMV saw its indicative refining margins double and raised its refinery utilization by six percentage points to 91% in the third quarter, as upstream production volumes weakened compared with the second quarter, it said Oct. 8. In a trading statement, the Central European company put its European refining margin indicator for the quarter at $4.43/b compared with $2.21/b in the second quarter and just 87 cents/b in the third quarter of 2020. Its sales of fuel and other oil products were up 16% on the quarter at 4.66 million mt.

TotalEnergies, Europe's biggest refiner, saw its average refining margin double in the third quarter of 2021 as fuel demand continued to recover in the region, but market watchers warn of headwinds from surging gas prices.

The company's "variable cost margin" for its European refineries averaged $20.50/mt, or about $2.80/b, in the third quarter, compared with $10.20/mt in the previous quarter, it said in an Oct. 15 trading statement.

The margin recovery, which remains below average 2019 levels, compares with minus $2.70/mt in the year-earlier period, when coronavirus lockdowns flipped TotalEnergies' reference margin into negative territory for the first time in over a decade.

Shell on Oct. 7 put its third-quarter global refining margin indicator at $5.70/b, up from $4.17/b in the second quarter. BP's global refining marker margin in the third quarter to Sept. 29 was a hefty $15.20/b, up from $13.70/b for the second quarter. However, a breakdown of the indicator shows US Midwest margins roughly double those in Europe.

Meanwhile Hungary's MOL, a significant Central European rival, has reported on its website a $1/b improvement in its group refinery margin between the second and third quarters, to $5.40/b.

Fuel demand in Hungary in the third quarter rose 4.8% year on year, data published on Oct. 13 by the Hungarian Petroleum Association (MASZ) showed. Within the total, diesel consumption was up 6.6% year on year to 650 million liters, just below its quarterly record set in Q3 2019. Gasoline demand grew 2.1% but still hit a 13-year high of 407 million liters.

The volume of gasoline supplied from Spain's storage facilities to the country's retail market broke above the pre-COVID-19 level for the first time in the third quarter, while volumes of diesel and kerosene continued to narrow the gap, data published by national fuel distributor Exolum showed Oct. 13. The country's refineries have gradually restarted units in response to the rising demand, with all refineries in Spain currently online amid a surge in refining margins.

French road fuel deliveries totaled 4.287 billion liters in September, up 3.6% year on year, according to industry group UFIP, citing data from the country's oil industry committee CPDP.

Diesel deliveries in September were up 1.4% year on year, while gasoline consumption jumped 11%. Deliveries of gazole non routier -- off-road ultra low sulfur diesel used for agriculture and construction -- also rose almost 11%.

Looking at other products, jet fuel demand in September was 41% higher year on year at 446,000 cu m, but was down 42% compared with September 2019.

In total, oil products consumption increased by 11% on the year in September to 4.855 million mt.

However, surging natural gas prices have pushed up the power and hydrogen costs for less integrated refiners in the Mediterranean, which are beginning to reduce throughput rates, according to trading sources.

Meanwhile, permanent outages have defined the European refinery scene since last year.

** Petroineos' Grangemouth refinery in Scotland has seen its capacity reduced by 30% to around 150,000 b/d after the closures of a crude distillation unit and the fluid catalytic cracker earlier this year, Ineos' site chairman, Andrew Gardner, said Sept. 22. In January, the company concluded consultations with employees regarding its proposal to reconfigure the Grangemouth refinery. The company has said previously that it proposes a smaller refining operation at Grangemouth and plans to mothball the CDU1 and the FCC, two units that "have been closed throughout the COVID pandemic due to significantly reduced local and international demand for fuels." Gardner said the CDU will not be restarted, while a "remarkable set of economics" would be required to restart the FCC because of a structural decline in European gasoline demand. "A lot of the gasoline from the FCC was higher sulfur, so it wasn't making its way into inland supply," he said. "It was more for upgrading and then getting sent further afield for blending."

** The Livorno refinery in northwest Italy will stop refining crude and suspend all related activities by the end of 2022, according to an announcement made to trade union representatives by its owner, Italian oil giant Eni, sources close to the plant told S&P Global Platts. The production of lubricants and ancillary activities will continue for the foreseeable future, according to the information. In January, Eni said that it was evaluating the conversion of Livorno into a biorefinery. A company source said in September that no decision had been taken yet. Meanwhile, workers at the Livorno refinery held a strike Oct. 13, according to information provided by sources close to the plant. No information was provided on the duration of the strike or the number of workers involved, nor whether it had affected output.

** ExxonMobil permanently shut its Slagen refinery in Norway in June to convert the site into a fuel import terminal.

** Gunvor's Rotterdam refinery shuttered its two crude processing units, one in 2019 and the other in 2020, and is developing new processes around hydrogen and the coprocessing of vegetable oil.

** Gunvor's refinery in Antwerp is being mothballed, with terminal activities continuing at the site. Future development opportunities are being assessed.

** TotalEnergies said it would convert the Grandpuits refinery into a biofuel and plastics recycling complex, ending crude refining at the site in early 2021.

** Portugal's Galp said in April the last units at its Porto refinery should be stopped at the end of the month and decommissioning will then start, to be followed by decontamination. The company had said it would discontinue refining operations at the Porto refinery from 2021 and concentrate its core refining activities and future developments at the larger Sines refinery. The site at Porto will remain a logistics hub, with the company assessing other uses.

** Finland's Neste said it had discontinued refining operations at its smaller Naantali refinery at the end of March 2021. With Naantali shut down, the company will focus the site on terminal and harbor operations.

NEW AND ONGOING MAINTENANCE

Refinery
Capacity
Country
Owner
Unit
Duration
Sannazzaro
190,000
Italy
Eni
EST
2020
Tenerife
90,000
Spain
Cepsa
offline
Since 2014
Bratislava
122,000
Slovakia
MOL
part
2020
Duna
165,000
Hungary
MOL
part
2020
Ploiesti
48,000
Romania
Lukoil
Part
Sep
Burgas
190,000
Bulgaria
Lukoil
full
2021
Gothenburg
125,000
Sweden
Preem
full
2021
Cartagena
220,000
Spain
Repsol
part
Oct
Sines
220,000
Portugal
Galp
part
Oct
Feyzin
109,000
France
TotalEnergies
part
Oct

FUTURE MAINTENANCE

Petrobrazi
90,000
Romania
OMV
full
2022
Gdansk
210,000
Poland
Lotos
full
2022
Holborn
105,000
Germany
Oilinvest
full
2023
Sarpom
180,000
Italy
Joint
full
2021
Petromidia
114,000
Romania
Rompetrol
full
2024
Litvinov
108,000
Czech
Unipetrol
full
2024
Ingolstadt
110,000
Germany
Gunvor
part
2022
Haifa
197,000
Israel
Bazan
part
2022
Burghausen
76,000
Germany
OMV
full
Q3,2022

Near-term maintenance

New and revised entries

** The crude distillation unit at Portugal's Sines refinery was halted around Oct. 11 due to an unplanned outage at one of its furnaces, the company said in a regulatory filing Oct. 15. The unit was halted in line with security protocols, and is expected to operate at a reduced rate for a few weeks, it said. The conversion units are not affected and Galp is continuing to supply its clients in the Portuguese market, with no interruptions expected, it said.

** The FCC unit at France's Feyzin remains online but the rest of the refinery is offline following a fire at the crude distillation unit in early October, according to a source with a knowledge of the matter. Operations are likely to remain disrupted for at least a month, the source added. The company was unavailable to comment but said at the time that the refinery had been forced to adapt operations at certain units. The fire in the early hours of Oct. 4 was put out quickly with no casualties, the company said, adding it was ensuring supply to its service stations and customers.

** Lukoil's Neftochim refinery in Burgas, Bulgaria and in Ploiesti Romania, are expected back after works in late November, according to market sources. Burgas has postponed major works scheduled for 2021. The refinery typically carries out works in February and March but has deferred them to later in 2021.

** Sweden's Gothenburg refinery is currently undergoing maintenance, which was planned for Q4 2021.

Existing entries

** Spain's Repsol said Sept. 30 it will invest Eur75 million ($87 million) in a planned halt, which includes a full turnaround of its conversion and hydrotreatment units at Cartagena including the coker -- Europe's largest. The work, the largest and most expensive in the refinery's history, was planned to start the weekend of Oct. 2 and last 50 days. Besides the simultaneous work on all the conversion units, Repsol will carry out energy efficiency projects, which will result in a CO2 emission reduction of 68,000 mt/y. These include a new compressor in one of the flaring stacks, a new pre-heating unit in the topping unit's furnace and a new tower in that same location, the company said.

** Hungary's MOL expects to continue maintenance works at various units of the Danube and Bratislava refineries in the third quarter of 2021, having carried out smaller works throughout the second quarter, especially at the Danube refinery. The shutdowns are part of a more intense maintenance schedule at MOL this year, after several works were postponed in 2020 to control costs.

** Tupras reported that the maintenance of the FCC unit at Izmit, which was started in Q1 and scheduled to take 30 weeks, is ongoing. A periodic maintenance of the crude unit at Izmit is scheduled for two weeks in Q4. Planned periodic maintenance of the vacuum and lube units at Izmir, which had been scheduled for six weeks in Q4, have both been postponed until 2022.

** Italy's Sannazzaro de Burgondi refinery has been taken partially offline for large-scale maintenance works. Maintenance and upgrade works are being carried out on the slurry technology (EST) unit, which was taken offline following a fire in 2016, as well as on the refinery's hydrocracking unit and the visbreaking plant. All units are expected to be kept offline for some 18 months. Eni's EST plant had originally been scheduled to restart in 2020.

** 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

Existing entries

** OMV is planning a turnaround at its Burghausen refinery in Germany during the third quarter of 2022. During this time, the entire refinery will be at a standstill, including the butadiene plant.

** Israel's Bazan said it has decided to delay the scheduled maintenance of the FCC at Haifa from Q2 2021 to the first half of 2022 when there will be also maintenance at all the Carmel Olefin facilities.

** Gunvor Group said that its Ingolstadt refinery in Germany will undertake projects focused on heating systems and exchangers "to continue improving its energy efficiency and reduce its emissions." A planned turnaround in 2023 will allow additional reductions, by carrying out projects on the FCC.

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

** 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.

** 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.

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

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

** 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.