Total Refinery Plans Revealed by Next Spring
La Mede/Lavera plant merger project failed; Total may invest 300 mln euros in La Mede near Marseille.
Total, Europe's biggest oil refiner, is giving itself until the spring of 2015 to review its options for the French refining sector, which could include capacity cuts but no site closures, union sources told Reuters on Friday.
Total's European refining margins have dropped to near four-year lows this year, as the sector struggles to compete with more efficient plants in the Middle East, overcapacities in Europe and a decline in gasoline and diesel consumption.
The French group held a works council meeting on its refining strategy on Thursday evening, where head of refining Patrick Pouyanne replied to a list of 25 questions presented by unions on the future of the industry in France.
Following the closure of its Dunkirk plant in 2010, Total promised not to shut any more plants in France for the following five years. In August this year, CEO Christophe de Margerie said he did not plan to shut any refinery completely but might reduce capacity.
"Announcements will be made in the spring, around March-April, at the end of de Margerie's five-year promise," a union source said. "They haven't ruled out the closure of some units, but confirm no plant will be closed completely."
Pouyanne said a plan to merge the La Mede refinery near Marseille with the neighbouring Lavera plant belonging to Petrochina and Ineos had failed, two union sources said, due in part to the large investments needed to upgrade the site.
A spokesman for Total was not immediately able to comment.
The group nonetheless announced it was working on plans to convert the site, including the construction of a biodiesel making unit and a scrubber, which filters some pollutants, to make the site compatible with environmental legislation by 2018.
"I'm ready to invest the equivalent of three years of losses to make the site sustainable," Pouyanne told unions, according to the two separate accounts made to Reuters.
La Mede was losing about 100 million euros ($127 million) a year, which would mean upgrades of about 300 million euros, the union sources said.
Management also said the group wouldn't make any redundancies at La Mede, with possible job reductions being achieved via early retirement, according to unions. Pouyanne will visit the site on Sept. 29.
A motion to bring in an outside expert to quiz management, supported by the hardline CGT union, failed to get a majority of votes at the council meeting, two union sources said, highlighting how little appetite there is for a confrontation after the failed, two-week strike on wages of last December.
"We won't call for a strike until the announcements in the spring, it wouldn't make sense to go on strike for several months before Total is ready to say what it wants to do," a union source told Reuters.
Pouyanne said earlier this week Europe needs to cut refining capacity by at least another 10 percent by 2020 to restore a utilisation rate of 85 percent, the level at which the market is seen as balanced. Total owns five refineries in France.
By Michel Rose
