French Refiners Lost $946 Million in 2013 as Margins Shrank

Refiners in France lost 700 million euros ($946 million) last year as oil-processing margins shrank and the country imported more than half the diesel it used.

Refiners earned an average of 18 euros a ton, down from 36 euros a ton the previous year, according to the Union Francaise des Industries Petrolieres, or UFIP. The group, which represents companies such as Total SA (FP) and Exxon Mobil Corp. (XOM), estimates margins of about 30 euros a ton are needed to break even.

“We are in a situation that is extremely worrying,” Jean-Louis Schilansky, who is head of UFIP, said at a press conference. “The current situation is not sustainable.”

More refineries will have to close in Europe, he said, without saying whether there will be shutdowns in France.

Political debate about the future of refining in the country intensified last year after Petroplus Holding AG and Total shut plants and LyondellBasell Industries NV (LYB) mothballed another to adapt to lower demand. Total Chief Executive Officer Christophe de Margerie said last month that domestic capacity should be cut further to weather the decline in consumption.

France’s eight working refineries ran at 70 percent of capacity last year, while imports of diesel from the U.S. and the Middle East increased and European exports of gasoline to the U.S. dropped, according to a UFIP presentation.

French demand for oil products fell 0.7 percent to 75 million tons in 2013, UFIP said. The country, where most new cars sold run on diesel, imported 21.7 million tons of the fuel, or 56 percent of consumption.

Energy Costs

European refiners must contend with higher costs than their U.S. counterparts, who benefit from cheap natural gas from shale. Energy makes up 30 percent of total expenses for oil processors in the U.S. compared with 60 percent for their European competitors, UFIP said.

French refining capacity dropped to 74.8 million tons a year in 2013, including the mothballed Lyondell plant at Berre, from 98 million tons in 2009, according to UFIP statistics.

Customers in France can expect higher prices at the pump in 2015 and 2016 as fuel producers are more heavily taxed for carbon output, the Paris-based lobby group said. Diesel prices will rise by 8.5 euro cents a liter in 2016 compared with this year, while gasoline will increase by 7.7 cents a liter over the same period, UFIP data show.

To contact the reporter on this story: Tara Patel in Paris at tpatel2@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net

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