Exec: Innovation Key to Helping Europe's Refiners Survive

In early October, MOL Group announced plans to convert a refinery in Italy into a products terminal. More recently, Ineos was preparing to close a Scotland petrochemical plant and possibly an adjacent refinery that it owns with PetroChina. Although an eleventh-hour deal will keep the Ineos facilities open, the episodes in Italy and Scotland illustrate the precarious state of Europe's downstream oil and gas sector as facility owners grapple with falling demand, mounting regulatory burdens and escalating operating costs.

The scenario for European refiners is grim, and a recurring theme articulated by participants at GDS Internationals' recent Next Generation Downstream Summit Europe was the importance of keeping processing facilities open amid a continuing wave of consolidation. Deploying advanced technology in novel ways should increase the likelihood that refineries will survive this trend, according to an executive with Nalco Champion, one of the summit's sponsoring companies.

"A lot of what we hear is from the procurement side of the organization that says, 'cut costs, cut costs, cut costs,'" said James Dees, Nalco Energy Services' general manager for Europe, Russia and Africa.

"What I've heard from our customers at this event is that we need innovative and creative solutions to keep them competitive," Dees continued. "It's not cutting costs. It's being innovative and being creative and helping them be more competitive to lowering their total cost and to help them improve operating margins."

Despite the bleak outlook for European refining, Dees said that his discussions with summit delegates were cause for some optimism.

"I was very encouraged by the conference," he noted. "It encouraged me from the perspective that they want us to be creative and bring ideas to them and help them find ways to be more competitive and to keep their assets running in a very difficult and tough European market – probably, in my opinion, the toughest market on the globe."

Dees added that a common prediction that delegates shared with him was that Europe's refining situation "would get tougher before it gets better." As a result, service companies such as Nalco Champion will need to be even more creative in developing products for their downstream clients, he said.

"[T]he things that we're doing to improve our product technology, to develop our knowledge-based systems is the right direction because those things are going to help our customers here, not only in Europe, but globally be a more competitive company and help their downstream business be more sustainable," Dees said.

According to a top official with the UK Petroleum Industry Association (UKPIA), gatherings such as the Next Generation Downstream Summit provide a good venue for downstream pros to put industry-wide challenges into perspective and begin to brainstorm about how to overcome them.

"I think that it's highlighted that the issues and challenges that we face are well known but at least we have some common sharing as far as possible of some workable solutions that will help folks through," said Chris Hunt, director general of UKPIA and the master of ceremonies at the Milan summit. "Some useful networking and contacts have been made to help share best practices and ways forward and overall I think it has been an excellent, excellent conference."

The Oct. 14-16 summit, which took place at the Melia Milano hotel, incorporated a new roundtable format that GDS International is integrating into its events, said Rob McCabe, Europe, Middle East and Africa (EMEA) product director for summits and events with GDS. For the Milan summit, delegates and solution providers participated in roundtables to explore the following topics:

  • Refinery initiatives and innovation
  • Engineering, technology and monitoring
  • Operations management

"What these roundtables do is start to engage people," said McCabe, adding that participants are grouped based on common interests. "We really do care as an organization to match them up correctly."

McCabe and other GDS staff are already busy using feedback from the Milan summit to develop content for two downstream oil and gas summits in 2014. In February, GDS will launch its Next Generation Downstream North America Summit in Houston. Next fall, the event organizer will host the NG Downstream Summit EMEA (with a special focus on Russia and the Middle East) in Bremen, Germany.

"We're pleased with this one, we've had really good feedback and we're going to take that forward into a fantastic next summit in Europe, which will be in Bremen, Germany," said Ben Williams, GDS' EMEA sales director, adding that 85 percent of solution providers have already re-booked for the Oct. 14-16, 2014, summit.

"[T]he North American one is in February and bookings are happening," added Williams. "We've got staff on site now actively booking and that's gone very well."

Matthew V. Veazey has written about the oil and gas industry since 2000. Email Matthew at mveazey@rigzone.com

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