The Strategist

Statoil halved gasoline production at its biggest refinery

12/27/2016 - 14:55

Production of gasoline and diesel fuel at Mongstad, the largest oil refinery of Norwegian group Statoil, has decreased by 50% due to a leak of refinery products occurred in November.

A broken pipe, located at an altitude of 50 meters, has not yet been replaced because of strong winds, blowing on the west coast of the country in recent weeks.

The company still has not officially informed the market about the state of emergency and partial stop of work at the refinery. Statoil’s spokeswoman Elin Isaksen confirmed to journalists of Dagens Naeringsliv that one of facilities at the old refinery is not currently working.

She noted that the present situation "is affecting a significant portion of production" and "means significant financial losses" for the company. However, she refused to go into details.

On October 25, there was another emergency at the refinery. The facility’s staff was evacuated due to a hydrogen leak, but explosion of gas was prevented in time. Currently, the incident is being investigated causes of the incident. Statoil itself admits it was quite serious.

Jan Eirik Feste, director of local department of labor union, told Dagens Naeringsliv that Mongstad began to bring considerable income after the fall in prices for hydrocarbons (344 million kroons in profit before tax in 2015). Currently, it is being used too actively, and safety issues are given inadequate attention.

Currently, Statoil is shifting its focus from oil to wind power. This is a significant event for the entire industry.

Recently, the company sold a key project in the oil sands of Kai Kos Dehseh (KKD) in the Canadian province of Alberta. The assets were sold to Athabasca Oil. According to The Wall Street Journal, about two years ago the company canceled plans to develop a major project on the oil sands because of concerns about its profitability. Instead, Statoil is going to start construction of a large wind farm off the coast of New York.

Sale of KKD means that Statoil will get rid of all of its oil sands, which have just recently been considered a promising direction of long-term development of the oil industry. At the same time, Statoil will lose $ 500- $ 550 million from this sale, though the company is ready to abandon oil production in the region in favor of wind power.

Statoil is a Norwegian oil and gas company, which daily produces about 1.8 million barrels of oil equivalent - about 5.5% of the daily world crude oil production. However, the company's net loss in the III quarter of 2016 grew at an annual terms by 24%, to $ 427 million.