BP downbeat on oil refining margins

BP says oil refining margins unlikely to improve this year as industry outlook challenging
Jane Wardell, AP Business Writer, On Tuesday February 16, 2010, 1:31 pm EST LONDON (AP) -- Oil refining margins -- the profits made from turning a barrel of crude into gasoline, diesel and other fuels -- are unlikely to improve substantially this year, a BP PLC executive said on Tuesday. Richard Hookway, BP's chief financial officer for refining and marketing, also said that the company is unlikely to build a hydrocracker facility at its Rotterdam refinery in the next few years, noting the difficult outlook for the refining sector. Hydrocrackers are used to make distillates such as diesel fuel. "We see refining margins over the coming 6 months, 12 months, to be quite challenging," Hookway said at the annual International Petroleum Week conference in London. "We don't see them as improving substantially on 2009." Major oil companies like BP have suffered from weak refining margins because of a collapse in demand thanks to the global economic rout and a glut of new capacity in the emerging economies of Asia and the Middle East. "The golden moment of refining, let alone the golden age, won't be returning any time soon," Hookway said. However, he added that refining margins found a floor in the final quarter of 2009 and that he didn't "see them going much below that level." BP, Europe's second largest oil company, said refining margins averaged $4 a barrel in 2009, at least $2 below the 10-year average and well below the $10 per barrel in the boom times of 2007. Crude oil prices crashed under $40 a barrel at the peak of the financial turmoil, far below a record high of $150 in July 2008. The drop in crude prices has already reinforced fears that crucial downstream investment -- in refining and distribution -- will be curtailed. Several other oil majors, including Royal Dutch Shell, Chevron Corp., ConocoPhillips and Valero Energy Corp. have scaled back their global refining operations. Hookway said that BP would be selective about investment in downstream projects, but acknowledged that it eventually wanted to rebalance its refinery operations away from OECD countries in favor of emerging economies, which will be responsible for oil product demand going forward.

in "on the drawing board" for BP's Rotterdam refinery.9 million profit. Hookway said that a hydrocracker project.02:31pm New Zealand Refining Company’s full-year profit plunged 81% to December 2009. The $23. but by the end of the year it was down to around USD1 a barrel. "We want to both have more and a greater proportion of our assets in fast-growing parts of the world. France." In the meantime. which saw demand for oil products falter just as new refinery had come online. notably in the UK.6 million after-tax full year profit compares to last year’s $124.5 million from last year’s $397. but not for the next year or two NZ Refining full-year profit down 81% Andrea Deuchrass | Tuesday February 16. when the company was operating at a loss. “Margin pressure continues and is forcing the sale. .” he said. which would help the company produce higher quality middle distillate fuels like gasoil and diesel. Chevron and Exxonmobil declaring a significant downturn in profits. Ordinary revenue was down 37% to $250. Chairman David Jackson said the disappointing result had been widely anticipated. Spain."We want to increase and rebalance our exposure. “Conditions were dominated by the global financial crisis. the company’s refining margin was about USD12 a barrel." he said. including BP. given the volatile market conditions of the second half of 2009. At the beginning of the year. The Marsden point-based company (NZX: NZR) will not pay a dividend. Shell.8 million. 2010 . “The resulting oversupply has continued to depress refiners’ margins with a number of major oil companies. "It certainly would be part of the long-run agenda for refineries like Rotterdam. closure or reduced capacity at refineries across the globe.

The shutdowns. for the replacement of a catalyst in the hydrocracker and regenerating the Platformer catalyst respectively. the company said it operated at near full capacity for November and December.3 cents to $3. . last November. Mr Jackson said there was no change to its dividend policy and dividend would resume as soon as the company returned to sustainable profitability.8m in 2008).9 million barrels of feedstock (compared to 39. the company said its customers’ confidence in the plant kept it fully loaded.2 million barrels.000 barrels a day Delaware City plant. The company's share price was up .8 million cubic metres of petrol. diesel and jet fuel to Auckland (compared to 2. despite two shutdowns. but margins dropped to the lowest point in at least five years. Earlier this month. NZ Refining said two shutdowns were scheduled for 2010 – in April and September.” However.60 this afternoon. the refinery processed 37.2m in 2008) and pumped 2. Other (budgeted) capital costs during the year amounted to $24 million. would cost the company $44 million. Directors had therefore decided not to pay a final dividend. Last year.Japan and the US where the largest refiner Valero. with a throughput of 7. closed its 185.