French oil refiners blame U.S, Asia, Mid East for near $1 bln loss

Wed Feb 5, 2014 9:29am EST

* French refining loss hit 700 mln eur in 2013 - UFIP

* French refining margins down by half to 18 eur/tonne

* French oil products consumption fell to 29-year low

By Michel Rose

PARIS, Feb 5 (Reuters) - The French refining sector lost 700 million euros ($945 million) last year, French oil lobby UFIP said on Wednesday, as cheap U.S. fuel imports and more competitive plants in Asia and the Middle East ate away at European refiners' margins.

Squeezed by declining European demand, French refineries have also seen their traditional African markets for gasoline exports dry up as refiners in the United States take the market.

"The refining sector is now facing extremely intense competition, especially from the United States, because energy costs for American refineries are much lower than ours thanks to shale gas," Jean-Louis Schilansky, the head of UFIP, said at the oil industry group's annual presentation.

"New refineries in operation in Asia and the Middle East are highly productive too, so we're caught in a competitive vice between America and Asia," he said.

UFIP data showed margins at France's eight refineries, including oil major Total's five plants, halved to 18 euros per tonne in 2013, much below the 35 euros a tonne usually necessary for a plant to be profitable. Gross margins stood at 12 euros per tonne in January, the data showed.

The cost of energy accounts for 30 percent of U.S. refiners' operating costs, against 60 percent for their European counterparts, UFIP said.

Total, Europe's biggest refiner, said earlier this year it expected to lose about 500 million euros in its French refineries in 2013. A two-week strike at Total's five plants at the end of last year also highlighted the industry's vulnerability.

The remaining refineries are owned by Petroineos , Exxon Mobil and Lyondellbasell .

Schilansky said the dire competitiveness of the refining sector could be a sign of things to come for other sectors in Europe.

"I don't want to sound overly gloomy, but this is something that risks to happen in other sectors than refining," he said.

"We're probably the first ones hit by the phenomenon because we're a base material industry, but the chemical, petrochemical, cement, steel industries, all big energy consumers in the heavy industry may be hit exactly the same way," he added.

Some 14 plants have shut in Europe since 2007 to adjust to the lower demand, with refining capacity cut by 24 percent in France over the same period, 22 percent in Britain, 15 percent in Germany and 10 percent in Italy, UFIP said.

Lower demand for oil products in Europe, as cars become more efficient and consumers try to cut their transport bill, has also weighed on the refining sector.

French oil products demand fell 0.7 percent to 75 million tonnes in 2013, the tenth consecutive year of decline and the same level as in 1984, according to UFIP.

Demand is unlikely to pick up in coming years, as a planned carbon tax and other green levies are expected to boost fuel prices at the pump from next year.

French drivers can expect the price of diesel, the most widely used fuel in France, to be inflated by 0.61 euros per litre in 2015 by the new measures compared to 2014, UFIP said.

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