Petrom will most likely start tearing it down next year and has already taken steps towards securing the necessary permits.
“We want to tear down the refinery, not the entire site, because our intent is to build a storage facility,” says Neil Anthony Morgan, Executive Board Member in charge with Downstream Oil activity of OMV Petrom.
Petrom began securing the necessary permits in February. One cannot tear down a refinery overnight, it is a process that takes several years, Morgan says, adding he would be happy if the process could commence this year because preserving the facility has its costs. The operation will most likely begin next year.
It takes about five years to build a refinery – something the Petrom official says he has been involved in, and tree years to tear it down. What will result from the demolition will probably be of little use to Petrom, which might be able to salvage some electric motors, though, he added.
The Briton has an over twenty-year experience in the refining and petrochemical industry and has been a member of Petrom’s board since 2011.
Arpechim refinery, which has a capacity of 3.5 million tons, was closed for good in 2011 and Petrom said at a the time the facility was too small and landlocked, which made any potential retooling efforts unprofitable considering the country had refining overcapacity.
Therefore, Petrom focused on its other refinery, Petrobrazi, in which it invested EUR600 million and completed its upgrade last summer. The investment took Petrobrazi’s capacity to 4.2 million tons and the refinery is used solely to process the local oil production of Petrom.
The drop in the oil price from a high of $115 in June 2014 to less than $50 now meant a breath of fresh air for refineries, which saw their refining margins soar partly because of a resurgence in oil product consumption.
Petrom’s refining margin was $8.95 per barrel in the second quarter of 2015, while in the corresponding period of last year it lost $1.88 per barrel. The refining margin is defined as a ratio of the oil price and the price of oil products.
Although they tend to go hand in hand in the long run, there may be times of disconnect, when oil product prices go up, while the oil price goes down. This is what is happening right now, when, despite the oil price decline, gas prices are on the rise because it is vacation time and most cars in the US run on gas.
There was a positive response to the fuel price decline in Romania, which showed in a rising demand for gas and diesel. Even so, restarting Arpechim is highly unlikely, Neil Anthony Morgan says. It is also unlikely that someone would want to buy Arpechim, but if they do show an interest in it, Petrom is open to discussing it, he added.
(English version by Loredana Fratila-Cristescu)