UK refining: the perfect storm

In comparison to the talks from Stephen Cooper and Istvan Zsoldos, Chris Hunt of UKPIA presented a slightly more positive spin on what is happening in the refining sector at the moment with particular focus on the UK side of things and opened his presentation with the statement ‘the refining industry is going to play a vital role in the global economy.’

UK refining
The UK’s seven refineries were labelled as the ‘Magnificent 7’ by Hunt. They have a processing capacity of approximately 1.5 million bpd and support 88 100 jobs in the UK oil and gas industry. The seven also contributed approximately £1.1 billion to the UK economy in 2011. So, how exactly could the country do without them? In my opinion, I don’t think it could.

Imports and exports
The IEA has set an import dependency benchmark cap of 45%. When it comes to the UK, during 2012 the country imported 56% of its jet fuel and 48% of its diesel so it was already over stepping the IEA import mark to meet demand. By 2030, Hunt projected that UK jet fuel imports could rise to 78% and diesel to 77% which is way above the figure set. So, if the UK isn’t to fall even further in to the import hole then the Magnificent 7 need to be here to stay and also need to increase their processing capacities, especially of jet fuel and diesel.

The fact that more diesel is needed once again indicated a theme for the ERTC. Europe needs to get on board with and increase its production of middle distillates. It appears that they are going to be key to keeping the European refining industry afloat and on the correct competitive track.

Legislation and the environment
UKPIA play a large part in ensuring that the refining industry in the UK is successfully heard when policy and government decision are made that will impact the industry. Whilst talking about environmental aspirations, Hunt highlighted that they always have a cost and said that at the moment, environmental expectations are too high for UK refineries against current costs and legislation. His key example for this was the fact that on ‘a good day’ UK refineries make a profit of only 1.65 p /litre of petrol sold at UK pumps. So, if environmental expectations are set any higher then it seems that the consumer is going to have to pay more to ensure that those costs are covered as the profits are, at a bare minimum compared to a price at the pump of £1.28 /litre (local petrol price).

Hunt concluded by saying that the UK refining industry is not seeking special treatment or protection, it just wants a legislative level playing field.

Written by Claira Lloyd

Read the article online at: https://www.worldpipelines.com/special-reports/26112013/uk_refining_perfect_storm/