LONDON (Reuters) - Up to 40 small refineries in Europe could close over the next two decades, if they cannot tap growing export markets, because demand for oil products in the region is expected to drop, a study by industry association CONCAWE shows.
A total of 166 million metric tonnes (182.98 tons) will be lost from fossil fuel demand between 2005 and 2030, according to the study presented by Michael Lane, secretary general of CONCAWE, at the Platts European Refining Markets Conference in Brussels on Tuesday.
CONCAWE is the oil companies’ European association for environment, health and safety in refining and distribution. Its members represent nearly 100 percent of European refining capacity.
“What is quite shocking is that this 166 million tonnes of demand decline is equivalent to the combined capacity of the nine biggest refineries in Europe or the 40 smallest, almost half of the 90 currently active EU mainstream refineries,” Lane said, whilst noting that export demand could help offset this.
The study shows some 32 million tonnes being stripped from heating oil demand, 39 million tonnes from inland heavy fuel oil demand due to substitution by natural gas and improved boiler efficiency, and 43 million tonnes from road fuel demand.
Lane cited legislative pressures to reduce carbon emissions from passenger vehicles in the European Union, which will lead to some substitution of fossil fuels by renewables, as well as improved vehicle efficiency.
Total road demand for diesel and gasoline is expected to shrink by 81 million tonnes between 2005 and 2030, mainly due to a steep decline in demand for gasoline.
Middle distillates will therefore make up a greater percentage of the demand mix, accounting for 61 percent by 2030, up from 46 percent in 2000.
“It will be increasingly difficult for gasoline-oriented EU refineries to meet this changing demand ratio,” Lane said.
Instead, refinery operating rates are expected to decline in line with demand trends, with utilization rates of crude distillation units (CDUs) - the central unit in a refinery - seen slumping to 74.5 percent by 2030 from 85.8 percent in 2008, the study showed.
The average EU refinery utilization rate is seen by the CONCAWE study falling to 82 percent in 2015, from 86 percent in 2008, in spite of the closure of 5 percent of refining capacity between 2008 and 2015 that has already been announced.
However, Europe will have to try to increase its production of diesel and jet fuel to make up the growing shortfall as demand patterns shift. The investment projects announced to date should boost European distillates hydrocracker capacity by 28 percent, Lane said.
“But the announced investments only address part of the total needs,” he added, saying an estimated $51 billion in expansion would be required between 2008 and 2020, compared with the $30 billion in projects so far announced.
Reporting by Claire Milhench; Editing by Anthony Barker