BP to sell more refineries
LONDON: BP plans to sell more refineries without investing in new plants despite growing oil production and will focus on modernising existing operations while expanding its network of filling stations to generate $3 billion in additional cash.
The group’s head of refining told Reuters that even though BP’s output was set to spike in the next five years as new fields become operational, its attitude to refining remains more cautious.
“Are we going to invest in more green field refining in BP? Probably not,” said Tufan Erginbilgic, who has worked in refining since 1990.
Refining of crude oil into fuels such as gasoline, diesel and jet fuel has for years been the industry’s problem child, having to grapple with weak and volatile profit margins as well as competition from modern refineries built in China, India and the Middle East.
The problems are compounded by the prospect of more energy efficient cars, aircraft and heating, tighter marine fuel standards, the rise of electric vehicles and slowing consumption growth.
A push to modernise and streamline BP’s refining, trading and marketing — known as downstream activities — generated $5.6 billion in free cashflow last year, up 25 per cent from 2014 despite refining margins at 12- year lows, Erginbilgic said. Erginbilgic, who became downstream chief in 2014, said that he is aiming for a $3 billion increase in free cashflow by 2021.
“We will sell one or two assets, making very good money today because the tide went up for these assets,” he told Reuters.
Small portfolio
Refining proved to be extremely valuable for integrated oil companies, offsetting much of the losses from production operations during the two-year tumble in oil prices that started in 2014.
Erginbilgic says that BP’s investment decisions are driven by an expected global push towards greater energy efficiency and its belief that demand growth will slow in the next 20 years to reach about 112 million barrels per day (bpd) from 96 million bpd today.
Overcapacity and weak demand growth will probably prompt more refiners to close plants in Europe, he said. In the United States, refineries will benefit from rising production and booming exports to growing Asian markets.
Last year BP and Russia’s top oil company, Rosneft , dissolved a refining joint venture in Germany. In the United States, BP invested billions of dollars in modernising its Whiting refinery near Chicago, originally built in 1889 by John D. Rockefeller’s Standard Oil Company.