Total refinery strike down *alert* | FT Alphaville

Total refinery strike down *alert*

Here’s a story that’s currently topping the minds of most energy traders in Europe, via Bloomberg:

Feb. 22 (Bloomberg) — Total SA unions called for a refinery strike to spread to all French plants and said fuel shortages could be imminent. “The strike will be intensified and extended to all refineries,” Charles Foulard, a representative of the Confederation Generale du Travail union, said late yesterday after talks with Total management on ending the six-day walkout broke down without an agreement. He warned the labor disruption will create fuel shortages in France this week.

He advised motorists to fill up their cars now. Workers at Total’s six French oil-processing plants and six of its 31 storage depots have been on strike since Feb. 16 to protest against the permanent shutdown of refining at its Flanders plant in northern France. The walkout by workers last week brought the company’s refineries to minimum output, and they said they were moving toward shutting down all crude- processing operations at the plants. Total confirmed this process has started.

It’s a serious matter because something like 1.1m barrels of refinery throughput could end being affected, which means French motorists might not be the only ones to feel the impact.

A government source told Reuters on Friday that France was not yet considering tapping into its strategic fuel stocks to compensate. However, according to JBC Energy’s Monday commentary it might have to soon enough:

The ongoing strike in France which started last Tuesday continued to support prices on Friday. All of Total’s six domestic refineries (out of 12 in the country) plus some six of its storage depots (out of 160) halted operations as workers try to prevent Total from permanently closing its 137,000 b/d Dunkirk refinery, which has remained idle since last September.

At the moment, France still has stockpiles of 10 to 20 days of demand available (according to industry officials), meaning that any widespread fuel shortages are unlikely to materialise in the next couple of days. However, as there is currently no end in sight to the strike and as ExxonMobil’s two French refineries might also be affected by the labour dispute this week, the situation could become worse in the foreseeable future.

Nevertheless, the likely closure of the Dunkirk refinery is only a first step in the consolidation of Europe’s refinery sector in the period up to 2020. In total, JBC Energy expects 3.4 million b/d of the region’s refining capacity (out of 18.15 million b/d in 2010) to shut down permanently during this period on the back of unhealthy margins due to pressured demand, increased blending of biofuels and competition from non-European refiners.

Ironically, the strike is a response to Total’s decision to permanently shut down refineries in the north of France due to lack of demand for processed products in Europe and diminishing margins.

Related link:

A Q4 refining headache for the oil majors
– FT Alphaville