Many oil refineries in Europe will be too unprofitable to proceed to trade once the sector has addressed sweeping new rules governing shipping fuel that begin in 2020, in line with an executive at a UK plant.
Refineries around the world are bracing for one of the largest mandated adjustments in the sector’s history – rules forcing the vast majority of ships to use gas containing less sulfur. The laws, widely known as IMO 2020, start in January and have been promoted as positive for firms that turn crude into a valuable product. But smaller plants in Europe usually boil out excess gasoline, as well as the kind of fuel that can soon become banned for most vessels.
The refineries hardest struck would be those designed to dedicate almost half their manufacturing to gasoline, and up to 14% to high sulfur gasoline oil, he mentioned, adding that Stanlow won’t undergo the same pressures because it churns out smaller proportions of these fuels.
Still, analysts at Wood Mackenzie and Facts Global Energy stated Europe’s refineries – long pressed by expanding capacity elsewhere on the earth – could continue a while longer. A rise in capacity in Asia and the Middle East in the mid-2020s is what can be most likely to force pauses in Europe, they said.
And while Europe’s older refineries will miss out on a few of the margin boost from IMO 2020 for diesel-like fuels, they still stand to realize from changing crude costs that mean sure types of oil that they process will drop in price – including Russia’s Urals, said Alan Gelder, London-based VP of refining, chemical compounds and oil markets at Wood Mackenzie.