so this refinery shortage (after an oversupply through 2012) already factored into co2 market obviously? comments my way... cheers "Europia's position borders on the ridiculous," said
Sanjeev Kumar, an associate at climate-protection group E3G in
Brussels. "Effectively they are the biggest polluters, and they
want more time for doing nothing while other companies,
including power producers, will have to bear the burden."
+------------------------------------------------------------------------------+
Refining Profit Threatened by EU Carbon Rebuff: Energy Markets
2010-10-01 09:02:22.978 GMT
By Mathew Carr and Ewa Krukowska
Oct. 1 (Bloomberg) -- The European Union's refusal to delay
phasing out free carbon-emission allowances may drive up costs
for refiners already struggling with a slide in crude-processing
profits.
Operating expenses may jump about 13 percent for refiners
by 2013, when polluters will be forced to pay for more carbon
permits under the EU's cap-and-trade system, according to the
European Petroleum Industry Association, or Europia. The profit
from turning crude into fuels such as gasoline and diesel in
northwest Europe sank to a seven-year low in the three months
through Sept. 23, according to data compiled by BP Plc, Europe's
second-largest oil company.
Having to buy more allowances will "add to the concerns of
the industry at a very difficult time," said Konrad Hanschmidt,
a London-based analyst at Bloomberg New Energy Finance, a
provider of data and research on carbon markets. Refining
industry emissions will rise 2.4 percent in 2011 to 148 million
tons, according to New Energy Finance.
The EU is seeking to balance the goal of reducing the
number of allowances in its carbon-trading market, the world's
largest, with limiting cost increases for energy-intensive
industries. At the same time, refiners and other companies that
face higher costs are trying to persuade the EU to put off plans
until later this decade to scale back free allowances for less-
efficient plants.
"That would give us time to adapt, in line with the
gradual reducing of the EU cap," Chris Beddoes, deputy general
secretary of Europia in Brussels. The European Commission, the
bloc's regulator, "isn't terribly receptive," he said.
Top 10 Percentile
Only those European emitters ranked in the top 10
percentile for carbon efficiency will continue to get almost all
their allowances for free under so-called benchmarking in the EU
trading program's third phase, which starts in 2013 and runs
through 2020. While allocations are still being decided in
Brussels, Europia expects refiners to get 25 percent fewer free
permits than emissions.
The European Commission, the Brussels-based regulator for
the EU, said last month it will present a draft in coming weeks
for distributing about 6 billion free allowances for phase
three. The 27 EU nations approved plans in 2008 to auction
rather than give away most EU allowances in phase three. The
commission didn't immediately respond to requests for comment.
'Borders on Ridiculous'
"Europia's position borders on the ridiculous," said
Sanjeev Kumar, an associate at climate-protection group E3G in
Brussels. "Effectively they are the biggest polluters, and they
want more time for doing nothing while other companies,
including power producers, will have to bear the burden."
Even if refiners get about 105 million free allowances in
2013, the cost of permits could be 1 billion euros ($1.4
billion) a year starting in 2013, based on a carbon price of
about 30 euros a ton and higher power costs, Beddoes said,
citing figures from Wood Mackenzie Consultants Ltd., the
Edinburgh-based energy advisers.
Profits in northwest Europe from processing crude fell to
$2.48 a barrel in the three months through Sept. 23, according
to BP, the lowest level since the fourth quarter of 2003. That
compares with $3.84 in the second quarter and $2.60 in the third
quarter of 2009.
Carbon futures for December 2013 closed yesterday at 17.36
a ton on the European Climate Exchange in London, up 16 percent
this year. EU carbon prices will exceed 30 euros by 2016,
according to New Energy Finance estimates.
Global Market
Most European utilities supplying power to EU manufacturers
will get no more free allowances after 2012. While utilities can
pass on higher pollution costs to customers, refiners can't
because they compete globally, Europia said.
Purchasing permits will be a burden "if the benchmark is
applied abruptly in 2013," Jean-Yves Touboulic, a strategy and
development executive in the refining and marketing unit of
Paris-based Total SA, Europe's biggest refiner, said in March.
Royal Dutch Shell Plc, Europe's biggest oil company,
declined to comment on the EU proposals other than to say it's a
"strong supporter" of the program, according to Kim Blomley, a
London-based spokeswoman, in an e-mail.
"We will be reviewing allocation decisions but cannot
comment further at this time," she said.
The European Commission said it aims to minimize the
migration of operators to nations without emissions caps in what
is called "carbon leakage." Europe has excess refining
capacity because India and China are building more of their own
plants, Harry Tchilinguirian, the London-based head of
commodity-markets strategy at BNP Paribas SA, said in August.
'Carbon Leakage'
"Refining is exposed to a significant risk of leakage,"
Beddoes said Sept. 28 at a Platts refiners meeting in Brussels.
Europia said its request to delay the use of the benchmark and
extend free allowances was supported by Business Europe, the
industry lobby group in Brussels, and the European Chemical
Industry Council in the same city.
The EU cap-and-trade system is the cornerstone of a plan
to reduce emissions this decade by 20 percent from 1990 levels.
It covers about 12,000 installations including power plants, oil
refineries and producers of steel, paper, pulp, glass, lime,
brick, ceramics and cement. Companies must have an allowance for
each ton of carbon dioxide emitted. Those producing more than
their allowances must buy more. Those emitting less can sell any
surplus.
The EU plans to sell about 60 percent of all emission
allowances in 2013 and increase the proportion of auctioned
versus free permits through 2020, according to European
Commission estimates. It will give away about 97 percent in the
five-year phase ending in 2012, according to figures from
Deutsche Bank AG.
Refiners face "a hugely challenging target," Beddoes
said. The industry has been curbing emissions since before 1990,
so "the easy things have been done," he said.
For Related News and Information:
European refinery stories TNI REF EUROPE <GO>
Emissions trading stories NI ENVMARKET <GO>
Global carbon emissions EMDA <GO>
--With assistance from Rachel Graham and Nidaa Bakhsh in London.
Editors: Mike Anderson, Justin Carrigan.
To contact the reporter on this story:
Mathew Carr in London at +44-20-7073-3531 or
m.carr@bloomberg.net;
Ewa Krukowska in Brussels at +32-2-237-4331 or
ekrukowska@bloomberg.net
To contact the editor responsible for this story:
Stephen Voss at +44-20-7073-3520 or
sev@bloomberg.net
