Exxon Mulls Closure of Norway's Slagen Refinery as Region's Clean Fuel Shift Continues

by Robert Perkins and Elsa Turner (S&P Global) Cites refining overcapacity, falling demand for fuels; Slagen processes North Sea crude, major fuel exporter; European refiners looking to biofuels, hydrogen projects

ExxonMobil is considering closing its 116,000 b/d Slagen refinery in Norway to convert the site into a fuel import terminal, the company said April 8, marking a potential further casualty of Europe's surplus refining capacity as the region's fuel demand shrinks and competition from new markets continues to grow.

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In 2007, the refinery installed a plant for blending biodiesel which currently supplies fuel with up to a 7% blend of a bio-component. In 2016, the plant began upgrading heavy fuel oil to boost the value of Slagen's product portfolio.

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European refiners have been shutting, or converting, plants to biofuels over the last year as the pandemic exacerbated structural pressure from shrinking fuel demand, growing competition from new plants in Asia and tough environmental legislation. With the pandemic accelerating the push for low-carbon energy, many refiners are now looking to biofuel or hydrogen projects in order to adapt to the energy transition.

In its latest medium-term oil report last month, the International Energy Agency warned that the outlook for the refining sector remains dire despite a recovery in oil demand, as overcapacity is likely to persist due to new plants in Asia and the Middle East while more fuel demand is being met by biofuels.

European oil demand peaked around 2005 and most of the region's top economics have banned sales of new conventional cars from 2030 to accelerate the electrification of passenger vehicles.

Last week, Repsol halted the crude distillation unit at its 150,000 b/d Puertollano refinery. In February, Finnish refiner and biofuels producer Neste warned that reference margins are expected to remain "very low and volatile" in early 2021 as input costs rise and the pandemic continues to depress sales of regular fuel. Neste permanently shut its 55,000 b/d Naantali refinery last month, Gunvor has shut its 115,000 b/d Antwerp refinery and Total is converting its 101,000 b/d Grandpuits plant to biofuels.

In the UK, Petroineos is looking to mothball two units at its Grangemouth refinery, which have been offline throughout the pandemic.

Sweden's Preem has abandoned a residue oil conversion complex project and started a conversion of Lysekil in a move that will make it the biggest producer of renewable fuels in Scandinavia.

The head of Italy's Saras -- owner of the biggest refinery in the Mediterranean -- recently estimated some 3 million-4 million b/d of global refinery capacity needs to close to rebalance the market. READ MORE

Three Exxon refineries top the list of U.S. polluters (Reuters)

Exxon Mulls Closure of Norway's Slagen Refinery as Region's Clean Fuel Shift Continues

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