Oil refiners had pinned their hopes on European diesel as the Continent’s fleet of personal diesel-powered vehicles grew to 45% by 2015, compared with 2% in the U.S., according to the International Energy Agency. Total had poured more than $2.4 billion into diesel-friendly upgrades at its two largest European refineries. Repsol and CEPSA invested $4.76 billion and $2.4 billion, respectively, on similar upgrades and modernization projects. Even independent refiners like Saras that aren’t tied to big oil-exploration companies shelled out hundreds of millions of dollars. However, a backlash against diesel sparked mostly by the Volkswagen AG emissions scandal has upended Europe’s big oil refiners. Sales of diesel vehicles are plummeting. “Diesel was the darling and has become the devil,” said Dario Scaffardi, executive vice president at Saras. To be sure, Europe still remains one of the world’s biggest consumers of diesel. European demand is estimated at 6.4 million barrels a day this year, over a fifth of global diesel consumption, according to the IEA. “Refineries that invested in complexity will have the ability to modify output toward heavier distillates [like marine and jet fuel]. They are well prepared,” said John Cooper, the head of refining industry group Fuel Europe. Switching to shipping fuel or jet fuel is easier for upgraded refineries because they are diesel-related distillates. By pumping out shipping fuel, the refiners can take advantage of new emissions curbs that cut the amount of sulfur allowed to be used in marine fuel starting in 2020. Source: The Wall Street Journal, 9/30/2017, p.B1.
TCGR Note: So where to from here! European refiners are already under intensifying competition from Asian and particularly Middle Eastern refiners. More Russian fuel exports are anticipated in the future. Between 2009 ─ 2016 about two dozen older refineries closed. Recent announcements like banning diesel vehicles from certain cities and increasing diesel taxes in France are now forcing big car makers like BMW, Daimler and even VW to scramble to increase their electric vehicle (EV) programs and Volvo/Geely has even announced all of their production vehicles will be either electric or hybrids by 2022. All of this brings serious revamp questions – more chemicals? For more information, see TCGR’s recently launched multi-client study “Oil-to-Chemicals: Technological Approaches and Advanced Process Configurations”.