BP Keeps Crude Unit at Gelsenkirchen Refinery Running Amid Tight Diesel Market

BP will keep running a crude-processing unit at its Gelsenkirchen refinery in Germany, reversing a previous plan to close it due to market conditions and profitability. The decision coincides with a tight market for diesel in Europe, driven by refinery closures, outages, and production curbs by OPEC+ producers. The refinery is currently undergoing asset sales.

BP has decided to keep running a crude-processing unit at its Gelsenkirchen refinery in Germany, reversing a previous plan to close it due to market conditions and profitability. The decision comes amidst a tight market for diesel in Europe, driven by refinery closures, outages, and production curbs by OPEC+ producers. The refinery is currently undergoing asset sales.

The move by BP is a strategic response to the current market dynamics. The European refining sector is undergoing significant changes due to the energy transition, with up to 1.5 million barrels per day of refining capacity predicted to be shut down by 2030 [1]. The declining demand for fossil fuels, driven by the rise of electric vehicles and policies to reduce CO2 emissions, is a key factor behind this trend. Shell, for instance, plans to have only two refineries left in Europe by 2025, focusing on North America and China [1].

The tight diesel market has been exacerbated by refinery closures and outages. For example, the Prax Lindsey Oil Refinery in Immingham, UK, filed for insolvency, putting hundreds of jobs at risk [2]. The UK is well supplied with fuel, but the closure of Lindsey Oil Refinery underscores the vulnerability of the supply chain [2].

BP's decision to keep the Gelsenkirchen refinery operational is likely influenced by the current diesel supply crunch. The diesel market is experiencing significant pressure, with U.S. stockpiles dropping to the lowest levels since 1996 and European benchmark futures signaling a tighter market [3]. The shortage is driving up diesel prices, used in various sectors from construction to transport and heating.

The refinery closures and conversions mark a historic turning point for the European refining industry. Some refiners are exploring opportunities to convert their facilities into biofuel production sites or integrate them with petrochemical facilities. However, the profitability of these projects remains uncertain and depends heavily on government policies [1].

In conclusion, BP's decision to keep the Gelsenkirchen refinery operational is a strategic move in response to the current market conditions. The tight diesel market, driven by refinery closures and outages, underscores the importance of maintaining operational refineries. The European refining sector is undergoing a profound transformation, and companies like BP are adapting their business models to survive and thrive in this new market reality.

References:
[1] https://energynews.pro/en/europe-reducing-refining-capacity-in-the-face-of-energy-transition/
[2] https://www.bbc.co.uk/news/articles/cj9vzyyyv3do
[3] https://www.ttnews.com/articles/diesel-supply-crunch