Europe’s refiners to feel pain from China deal

LONDON – China’s landmark purchase of European oil refineries this week could sound the death knell for poorer plants in the declining European sector.

Petrochina, the world’s second most valuable oil firm after Exxon Mobil, bought into the refineries of British firm INEOS – highlighting Beijing’s quest to diversify its wealth away from forex reserves in US Treasuries.After years amassing production assets, Petrochina has targetted refining in a bid to control oil from drill head to petrol pump as a fully integrated major.The purchase into the Lavera refinery in France and Grangemouth in Scotland, the UK’s last fully British-owned refinery, comes as Europe’s refining sector struggles with excess capacity, high taxes and competition with cheap gas.It has thrown a life-line to the two plants by injecting capital and saving jobs, but Petrochina may drive the last nail into the coffin of competing refiners, analysts said.’It could mean more competition for other European refiners. These refineries, which otherwise might be closed and become non-existent in a couple of years, could get some support from this unusual deal,’ said Eugen Weinberg at Commerzbank.David Wech from JBC Energy also said the life line deal was parallel to injection of capital from Russian co-ownership in other European refiners.’As (excess refining) capacity is not taken out of the system, the pressure will rise for those players who lack such relatively margin-insensitive and powerful partners,’ he said.PetroChina, Asia’s top oil producer, has been flexing its muscles expanding global trading network’Probably their interest in European refining is near the bottom of relevant factors. In its endeavours to become a global energy company, product trading is high on the list,’ said David Wech from JBC Energy. – Nampa-Reuters