Gunvor Group is considering mothballing its refinery in Antwerp, Belgium, due to doubts about its long-term economic viability, but has confirmed that its 1.1.million m3 tank terminal will stay operational.
Crude refining ceased in May due to the unprecedented slowdown in the demand for oil products, especially jet fuel and gasoil, the main outputs of the refinery, caused by the ongoing COVID-19 pandemic, and says it can find no scenario in which the refinery does not continue to make significant losses in the near future. Gunvor is in discussions with the employee Works Council regarding redundancies, which could affect 230 people.
A spokesman tells Tank Storage Magazine that various options are being considered for the tank terminal, although Gunvor is not making any further details public yet.
Gunvor bought the hydro-skimming refinery in 2012 and has since invested more than US$300 million (€266 million) in the refinery, now known as Gunvor Petroleum Antwerp (GPA). However, Gunvor says a ‘challenging European refining environment’ and various geopolitical and macroeconomic events have been compounded by the COVID-19 pandemic. While the company had previously been able to use trading activities to prop up GPA’s decreasing refining margins, it can no longer do so.
As well as the demand slowdown, GPA has struggled with a lack of availability of the medium sulphur crude oil it is designed to process, which is consequently becoming more expensive. More sophisticated refinery capacity will further increase demand. Competition due to an overall growth in refining capacity worldwide, with even more coming onstream in the coming five years will create an excess of supply, without any significant demand growth forecast. There has also been a significant increase in costs, including for a planned turnaround, and those related to regulations and environmental requirements such as carbon taxes.
Torbjörn Törnqvist, co-founder and Chairman of Gunvor Group, said that decision has been a difficult one, and pledged to support the employees.
“I first began working with the refinery in the mid-1990s, earlier in my career, when it was known as “BRC” (Belgian Refining Corporation). I know it very well, and was proud to rescue it from insolvency in 2012. Our team has made many efforts and investments to keep GPA a going concern, but the novel coronavirus pandemic has turned an already challenging situation into one that’s unsupportable. GPA has had and will now certainly continue to experience negative cash flow on a magnitude that is not affordable for the group.’
Gunvor’s refineries in Rotterdam in the Netherlands and Ingolstadt in Germany are unaffected.