Bloomberg News

Petroplus French Refinery Halt May Be Site’s Death, CGT Says

January 03, 2012

(Updates with meeting date in fourth paragraph.)

Jan. 2 (Bloomberg) -- Petroplus Holdings AG’s refining halt at units in Normandy today may mark the plant’s end, a union said, shrinking the crude-processing industry in France that may have posted losses of 800 million euros ($1.04 billion) in 2011.

Europe’s largest independent refiner by capacity, unable to buy adequate oil because of a credit freeze, will halt refining at three of its five plants, including at Petit Couronne in northern France, Antwerp and Cressier in Belgium and in Switzerland, it said in a statement Dec. 30. The sites have a combined processing capacity of 337,300 barrels of crude a day.

“This is a hidden way to kill” the refinery, Yvon Scornet, a representative of the CGT union at the plant near Rouen, said today on France Info radio. “We have negative margins, we aren’t making any money right now.”

The suspension is the fourth plant halt in France in two years and reflects Europe’s declining refining profits. French Industry Minister Eric Besson will meet on Jan. 4 with Petroplus Chief Executive Officer Jean-Paul Vettier about the future of Petit Couronne and the company’s talks with lenders, a ministry official said.

Petroplus, which is based in Zug, Switzerland and also has refineries in Germany and the U.K., is struggling to secure crude supplies for its five European refineries after lenders froze uncommitted loans last week. Standard & Poor’s cut the company’s corporate credit rating last month, saying it may go bankrupt if an agreement with banks isn’t reached.

The French refinery, with about 550 employees, has lost money for the past three years and has an “uncertain” future, unions for workers at the plant have said.

‘Stabbed in the Back’

“It’s like being stabbed in the back,” Scornet said, adding that units at the refinery will be gradually halted starting today under a process that is expected to take about one week and last for at least five.

With the French unemployment rate at 9.7 percent at the end of September, the government has been pushing companies not to cut jobs in France. Besson, who announced a “national action plan” for the French crude-processing industry last year, has yet to find a buyer for LyondellBasell Industries NV’s Berre refinery in southern France after the company announced the plant would be mothballed after its own efforts to find an acquirer failed.

Losses at French refineries may reach 800 million euros in 2011 because of “abysmal” crude-processing margins, Jean-Louis Schilansky, the head of the oil companies’ association Union Francaise des Industries Petrolieres. UFIP represents refiners in France, including Total SA and Exxon Mobil Corp., said in an interview on Nov. 30.

Tumbling Profit

French refiners lost 1 billion euros in 2009 when margins averaged 15 euros a ton and “hundreds of millions of euros” more in 2010, UFIP has said.

Profits from processing crude into fuels such as gasoline and diesel in northwest Europe plunged to 51 cents a barrel in November, compared with $1.52 in October, the International Energy Agency said in a Dec. 13 report.

Lower profits from processing crude oil into fuels have forced refiners to cut costs and shut plants across Europe. In the last two years, LyondellBasell, Petroplus and Total have decided to stop refining at their French plants in Berre, Reichstett and Dunkirk on lower European demand.

After the closures, France will have nine working plants compared with 24 in 1977. A permanent shutdown at Petit Couronne would bring the number down to eight.

The CGT union, the largest among refinery workers, last week called on the government to take over energy-related industries. The union led a strike by refinery workers in 2010 that caused fuel shortages at the pumps after crude imports were blocked and refineries halted.

--Editor: Vidya Root, David Whitehouse

To contact the reporter on this story: Tara Patel in Paris at tpatel2@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net


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