Rationalization process in the refining sector of the European Union in the context of activities aimed at restoring the competitiveness of refineries

Abstract

Analysis of factors shaping the market environment the oil sector in the European Union leads to the conclusion that the main elements having an impact on the profitability of refinery operations include their complexity index, access to a particular slate of crude oil, supply infrastructure (land premium, supply side, etc.) as well as laws and regulations regarding this very industry (both EU and national legislation). It should be emphasized that on the one hand European refiners compete against each other on national markets (including the EU market), on the other hand, however, they are vulnerable to competitive activity of refineries from outside of the European Union. Recent years clearly outline the downturn in the oil refining sector of the EU, that is manifested by idling the refineries, changes in their base model activity (conversion into the fuel and crude oil storage sites), or at best sector acquisitions by foreign companies (mainly from the Russian Federation). The progressive loss of capacity of oil refining on the Old Continent will cause significant changes in the energy security of fuel supplies, which simply, will have to be imported from abroad in the foreseeable future. In order to counteract the negative developments in the market, refineries affiliated with professional organizations (such as EUROPIA, Concawe) have taken an action in co-operation with the European Commission and the International Energy Agency aimed to develop the so-called pilot - horizontal control of refining sector efficiency (fitness check) involving the review of existing EU law. The purpose of this activity is to identify unnecessary burdens and unintended, negative impact of existing EU law on the sector. In line with the European Commission plans, the results of a fitness check are to be published in late 2014, yet the new non-legislative and legislative initiatives of the EU should take into account the context of the restoration of refinery competitiveness.