United Kingdom

Details

  • Industry: Oil and Gas
  • Type: Press release
  • Date: 14/06/2012

More closures predicted as European refinery industry faces uncertain future 

  • Cost pressures and over-supply blamed

 

 

More European oil refineries could have to close, with only the leaner, more efficient plants having any chance of survival, according to a report by KPMG.

 

Despite having been through changes over the last few years, KPMG predicts that many of the changes currently taking place in the European refining industry are likely to prove permanent as falling demand, rising imports, increasing European legislation, growing competition from emerging markets and eroding margins continue.

 

The paper entitled ‘The Future of the European Refining Industry’, considers the various challenges facing the sector and the need for action now. The report coincides with growing concerns about the future of the Coryton refinery in Essex.

 

Jeremy Kay, partner within KPMG’s energy and natural resources team, said: “The current challenges facing the European refinery industry may well prove permanent and any significant recovery will take some time.  The drop in demand together with increasing competition from emerging markets is eating at margins and we see no let up in these downward pressures. 

 

“Ageing European refineries cost more to maintain and operate than the newer plants being built in Asia and the Far East, and when you add this to the higher cost base and increasing levels of legislation in European refineries, the future is looking increasingly challenging, with a number of refineries fighting for their survival.”

 

According to KPMG, European refiners must act differently now to protect future profitability. To improve performance, refiners will continually need to challenge all aspects of their business.  Investment opportunities must be scrutinised and improvements pursued relentlessly in all commercial and operational areas.

 

Jeremy Kay concluded: “Identifying  those sites which will be survivors is likely to depend on how on the industry responds,  with the  largest refineries warranting  investment and improvement and the scope for divestment at other sites being limited in the current environment. Investment groups and oil companies from Asia, Russia and the US are being selective and targeting only the most advantaged European refining assets. Even so, divestment will only remain a viable strategy for refinery owners if the asset is properly prepared and the sale closely managed.

 

“If the current trend continues, within the next five to ten years European refining will be smaller, and joint venture partnerships are likely to become increasingly attractive as existing refining companies look to mitigate risks and share the high costs of investing through the future cycles. 

 

“European refinery owners can expect to make a return on their investments if they have a clear understanding of whether their sites are survivor sites or closure candidates, they have clear investment strategies for each site and a steely focus on costs and performance.

 

“But only the best will make an attractive return and to do so they will have to alter the way they react to the challenges they face.”

 

ENDS

 

The full report can be found at :

 

http://www.kpmg.com/UK/en/IssuesAndInsights/ArticlesPublications/Pages/future-of-european-refining-industry.aspx

 

For further information please contact:

 

Julie Marshall, KPMG Corporate Communications

Tel:  0121 232 3177  Mobile: 07887 633677  Email: julie.marshall@kpmg.co.uk

 

Emma Murray, KPMG Press office : 020 7694 6506, emma.murray@kpmg.co.uk

KPMG Press Office: 0207 694 8773

 

About KPMG

 

KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and operates from 22 offices across the UK with over 11,000 partners and staff.  The UK firm recorded a turnover of £1.7 billion in the year ended September 2011. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. We operate in 152 countries and have 145,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity.  KPMG International provides no client services.