The recent announcement by Petroplus that it would temporarily shut down three of its refineries is unlikely to materially benefit any of the major integrated companies with significant exposure to Europe--Total (FP) (with 87% of its total refining capacity in Europe), Royal Dutch Shell (RDSB) (39%), BP (BP.) (32%), and ExxonMobil (XOM) (28%).
Combined, Petroplus' three refineries facing shutdown total only 337.3 million barrels per day (mb/d), or about 2% of total European capacity, which is unlikely to be enough to affect margins over time given a secular decline in demand compounded by weak economic conditions. Since 2008, Europe already has lost about 1,350 mb/d of refining capacity with little benefit to margins. In contrast to the U.S. where margins rebounded sharply in 2011, European margins continue to languish thanks to the decline in demand and higher feedstock costs in part a result of lost production from Libya. Also, the operating environment is unlikely to improve anytime soon. Given the dim outlook for refining in the region, most of the major integrated firms previously mentioned, plus Chevron (CVX) and ConocoPhillips (COP), were already completely exiting or reducing their exposure to Europe.
While the loss of production from the three refineries may result in a short-term rise in margins, ultimately any supply deficit likely will be met with imports. In which case, large exporters to Europe, such as Valero (VLO), may see some benefit.
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