When it comes to efficiency, the EU refining sector is very competitive, and its energy intensity levels have steadily declined since the early 1990s. However, many competing regions have significantly lowered their non-energy cash costs. Any additional costs from EU-only policies (e.g. carbon costs) will only further aggravate these competitive disadvantages.
The most energy efficient EU refineries are amongst the best in the world. In fact, the EU average is second only to the new super-scale refineries found in Asia. Although some of these new refineries can create small advantages in energy use, it is important to remember that energy is the biggest cost for a refinery and every little improvement is significant.
However, the more critical advantages in favour of the EU’s competitors are related to non-energy costs, such as staff, maintenance, local taxes and services.
Apart from these energy and non-energy cash costs differentials, European refineries also face the cost burden of EU-only policies like ETS, IED and, potentially, FQD. These all make the EU refining sector even more vulnerable external threats like imports. This could result in higher risks related to security of supply and require considerable modification to the entire supply and distribution system.
THE REFINING PARADOX
The more stringent the fuel specifications are, the more energy is needed and hence CO2 emissions increase. Additional demand for diesel increases CO2 emissions, in addition potential new specifications and marine fuel specification change to distillates increase CO2 in refineries.