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Yara's Hull Plant Mothballing Highlights Europe's Ongoing Energy Challenges

The recent announcement (on 7 February 2025) of Yara International's decision to mothball its Hull ammonia plant in the UK, which has an annual capacity of 300,000 metric tons represents a striking example of how Europe's energy crisis continues to impact industrial production.

This decision is part of a broader strategy to reduce European ammonia production by 1 million metric tons due to high natural gas feedstock costs and the impact of European carbon policies.

The Hull plant closure, likely permanent, reflects the challenges faced by energy-intensive industries in Europe, where elevated energy prices and regulatory pressures have significantly eroded competitiveness.

The Natural Gas-Fertilizer Connection

Fertilizer production, particularly nitrogen-based fertilizers, is
inextricably linked to natural gas prices. Natural gas serves not only as an energy source but also as a key raw material in the production process. Through the Haber-Bosch process, natural gas (methane) is converted into hydrogen, which then combines with nitrogen from the air to produce ammonia – the building block of nitrogen fertilizers.

When natural gas prices surge, fertilizer production costs increase dramatically, as gas can represent up to 80% of the production costs for nitrogen fertilizers. This direct relationship makes fertilizer plants particularly vulnerable to gas price volatility.

The Chain of Events: Europe's Energy Market Transformation

The current situation stems from a series of significant changes in Europe's energy landscape:

Europe took the decisive step of sanctioning gas imports from Russia altogether, forcing a dramatic restructuring of its energy supply chains. This led to a rushed transition toward liquefied natural gas (LNG) from distant suppliers like the United States and Qatar. However, LNG proves significantly more expensive than pipeline gas due to the complex processes of liquefaction, oceanic transport, storage and regasification.

Germany's decision to accelerate the dismantling of its nuclear power plants set an early precedent for increased gas dependency in Europe's largest economy. This shift put additional pressure on the continent's gas supplies and grid stability.

The situation intensified when the Baltic states decided to cut
themselves off from the Russian power grid on 9 February 2025, leading to significant spikes in regional electricity prices. This was preceded by Ukraine's decision to halt gas transit through its territory on 1 January 2025, which had been a crucial pipeline route for Russian gas reaching European markets.

New U.K. Tax Rates Are Hammering North Sea Oil And Gas Drilling

In the UK, the situation intensified in October when the UK government raised the Energy Profits Levy (EPL), commonly known as the windfall tax, from 35% to 38%. The United Kingdom currently imposes one of the world's highest tax burdens on offshore oil and gas production, with operators in the North Sea facing a total tax rate of 78% resulting from the combination of standard taxation and the EPL.

The policy has created a challenging environment for the UK's domestic energy production, Britain now paying the highest electricity prices in the World.

Norway's Gas Threat: A New Risk to Europe's Energy Security

Norway, a critical supplier of natural gas to Europe, has recently hinted at potential disruptions to its energy exports due to domestic and geopolitical pressures. Currently providing nearly half of Germany's gas supply, Norway has become indispensable for European energy security following the decline of Russian gas imports.

However, soaring electricity prices in Norway—six times the EU average—have sparked domestic backlash, with political parties advocating for reduced energy exports to prioritize national affordability. Additionally, technical failures, such as the January 2025 shutdown of Norway's Hammerfest LNG plant, have already tightened Europe's strained energy supply.

These developments highlight Europe’s vulnerability to disruptions in Norwegian gas flows, further exacerbating its ongoing energy crisis.

European Decarbonization Policies

Both the EU and the UK are undergoing significant transformations in their energy landscapes as part of ambitious decarbonization policies aimed at achieving net zero emissions by 2050. The EU’s European Green Deal and legally binding Climate Law, alongside the UK’s Clean Power 2030 Action Plan and Emissions Trading Scheme (ETS), have driven renewable energy adoption and reduced reliance on fossil fuels.

The measures have significantly impacted energy prices across Europe. Investments in green technologies, carbon pricing, and restrictions on fossil fuel use have increased costs for industries and households alike.

In the UK, phasing out coal power and limiting new oil and gas licenses have heightened dependency on renewables and imported energy, raising concerns about energy security.

Deindustrialization in Europe: The Impact of Surging Energy and Gas Prices

These rising costs are placing heavy financial pressure on energy-intensive industries across Europe and the UK, accelerating trends of deindustrialization, exacerbated by geopolitical tensions, net zero energy policy decisions, and the reduction of Russian gas supplies.

Energy-intensive industries, such as chemicals, steel, and aluminum, have been particularly affected, with many companies curbing production or relocating to regions with lower energy costs like the U.S. or Asia. Yara's decision to close its Hull ammonia plant is only the latest in a long list of industrial failures across Europe.

#naturalgas  #deindustrialization  #europe  #fertilizer  #ammonia  #lng #ttf

Dow Polyurethane Technologies

January 30, 2025 | Midland, Michigan (Dow Inc.)

Dow, a global chemical giant, has initiated a comprehensive review of its European assets, focusing primarily on its polyurethane business. This decision comes as the company navigates persistent economic challenges and a complex regulatory environment in the region.

The review will assess the competitiveness of key facilities producing methylene diphenyl diisocyanate (MDI), propylene oxide, and polyether polyols—assets that generated approximately $2.9 billion in annual sales in 2023. Dow aims to optimize value through its "best-owner" strategy, with plans to complete the evaluation by mid-2025.

Jim Fitterling, CEO of Dow, emphasized the importance of adapting to market conditions while maintaining a value-driven approach. He noted that selling assets rather than closing them could align better with the company's long-term objectives.

This move reflects broader industry trends as other chemical companies reevaluate their European operations due to high production costs and stringent regulations.

Despite these challenges, Dow remains committed to strengthening its global portfolio while addressing regional complexities, reporting stable performance globally with its third-quarter 2024 sales rising modestly by 1%.

#dow  #chemicals  #polyurethane  #polyols  #mdi  #europe  #assets 

DOW petrochemical size in Terneuzen has been added.

#dow #terneuzen  #netherlands  #benelux  #europe  #petrochemicals 

Credit: Gunvor, Rotterdam refinery

By Jack Wittels and Alex Longley, November 22, 2024, Bloomberg

Gunvor Group is temporarily halting its Rotterdam oil refinery because it’s not making enough money, the latest sign that the continent’s plants are struggling to compete with upstarts in other parts of the world.

Effective Nov. 25, the so-called economic halt is due to a lack of prompt availability of commercially viable feedstock, the company said in a statement. Gunvor said it will “continue to monitor the situation and assess future resupply for the refinery in due course.”

With a processing capacity of 75,000 barrels a day, the plant is relatively tiny. Still, it joins a growing list of European refineries with plans to either halt or downsize, including the Wesseling and Gelsenkirchen plants in Germany and the Grangemouth facility in Scotland.

Europe’s refineries are under pressure from large, new plants, including in the Middle East and Africa, such as Nigeria’s giant new Dangote refinery. The rival fuelmakers can send what they make to Europe, and also compete for market share elsewhere in the world.

#gunvor  #refinery  #europe  #rotterdam  #wesseling  #gelsenkirchen  #grangemounth  #petroineos  #lyondellbasell  #ineos  #nigeria  #dangote  #crudeoil  #bp 

Francesco Sassi, 21 Oct 2024, eklipX Research

Spanish energy giant Repsol is freezing the development of all major hydrogen assets in the country, says the company.
After international companies cancelled their plans to export hydrogen from Norway to Germany, this is another alarming sign for the industry in the E.U.
According to Repsol, the world-renowned Oil & Gas Spanish giant, has halted all developments of green hydrogen projects in Spain with a large electrolysis capacity, namely over 350 MW. The company says that the existing regulations in Spain are at the root of this decision.
From Repsol's perspective, the current political discussion about possible windfall taxes on energy companies and banks to be confirmed in the long term makes these investments simply too risky.  Spain is one of the few E.U. countries to still apply a windfall profit tax to fund relief measures for consumers. In 2023, the levy granted Madrid additional €2.9 billion going into the State's coffers.
At the end of 2023, the same government extended the measure for 12 months, allowing companies to partially offset the levy on renewable energy projects. Now, the tensions between the State & Market stakeholders are rising due to the proposal of extending the windfall tax in the future.
Thus, we should understand Repsol's decision in the contexts of growing, domestic political frictions, and the instability of the hydrogen market in the E.U.

#oilandgas  #crudeoil  #naturalgas  #hydrogen  #greenhydrogen  #electrolysis  #repsol  #spain  #eu  #pipeline 

INEOS Holdings Investments Limited has been added and immediate parent identified.

#ineos #europe  #holding 

INEOS Europe AG shareholding has been updated.

#ineos  #europe  #switzerland 

Sunset on a refinery

"Oil refineries across Europe will be forced to shut as the West abandons fossil fuels in the race to net zero," – said BP CEO Murray Okincloss, commenting on the company's financial statements, The Telegraph reports.

He believes that older and smaller refineries in the EU will close or switch to biofuels as conventional oil refining becomes unprofitable due to a combination of soaring fuel taxes and falling demand from drivers switching to electric cars.

“So I would expect the least efficient refineries, which are the smallest, oldest around the world, to gradually close down as the world transitions over the next 10 to 30 years.”

BP has four refineries in Europe, three of which are already planned for conversion to produce biofuels including sustainable aviation fuel (SAF). Grangemouth Refinery in Scotland, which is owned by Ineos, employs 500 people but is scheduled to shut early next year.

Data from Fuels Europe shows that refining capacity in the EU, as well as in the UK, Switzerland and Norway, is already declining. Capacity has fallen from 781 million tonnes a year in 2009 to 677 million tonnes now. This means that Europe accounts for about 15% of the world's refining capacity - well behind the US with 21% or  APAC with 36%.

Contradicting the statements reported above, BP said in June that it was scaling back this year’s plans for the development of new sustainable aviation fuel (SAF) and renewable diesel projects at its existing sites, pausing planning for two potential projects while continuing to assess three for progression, according to Oilprice.

“This is aligned with BP’s drive to simplify its portfolio, focusing on value and returns,” the UK-based supermajor said.

In June, BP declared to continue investing in deepwater fields in the Gulf of Mexico, and made a statement saying it was "scaling back" new biofuels projects.

The company has tempered its enthusiasm for its low-carbon program, and with it cut its climate commitments, adapting to an operating model that assumes continued high oil demand into the 2040s and beyond.

“Labour policy says oil and gas production in the North Sea will be with us for decades to come ... They launched a consultation process with the sector last night and we’ll be engaged deeply with them on that,” Okincloss said.

The oil giant's net profit for the second quarter of this year was higher than expected ($2.76 billion). The company's low-carbon and natural gas division, on the other hand, performed poorly, posting a loss of $0.1 billion.

#refining  #refinery  #crudeoil  #naturalgas  #oilandgas  #europe  #saf  #sustainableaviationfuel  #renewablediesel  #biofuels 

Jim Ratcliffe, the second richest person in Britain and owner of Manchester United, stated on Bloomberg Television on 18^th June:

"Everybody's leaving petrochemicals in Europe, which is something I've never seen in my working life before."

"I'm talking mainland Europe, but I mean, sort of it applies to the UK as well, energy costs are five times the cost of America. Electricity is five times the price of America. It's not 5% or 10% or 50% but 500%."

"So anything where any sort of activity which involves using energy in some form or another is disadvantaged in Europe compared to America or the Middle East, obviously. And then on top of that, you've got a carbon tax. So if you emit anything which has got carbon in it, you pay a carbon tax, you don't pay a carbon tax in America. And then on top of that, you've got social costs."

"There's not much chemical industry left in the UK, it's pretty much finished really. Unfortunately, I don't think the government ever really recognize the importance of that. It's an enormous industry worldwide, but if you look at petrochemicals in Europe it's about the same size as automotive. It's a really big industry."

"Places like America are in a great place for manufacturing because, you know, they've got cheap energy, they've got no carbon taxes. They've got a government which is very interested in social costs, which are very manageable." 

#petrochemicals  #energycosts  #europe  #UK  #carbontax  #socialcosts  #manufacturing 

As per Wood Mackenzie "Global data and analytics" they are not expecting further refinery closure in Europe, other than the already announced of PetroIneos in Grangemouth and the Shell CDU closure in Koeln.

For full overview of Refineries go to our Refinery-Module.

#Refinery #refining 

LyondellBasell today announced the formal launch of a strategic review of the European assets of its Olefins & Polyolefins and Intermediates & Derivatives business units. The assessment will evaluate the assets through the lens of the company's strategy to Grow & Upgrade the Core, Build a Profitable Circular and Low Carbon Solutions Business, and Step Up Performance & Culture.

"At the 2023 Capital Markets Day, we stated our intent to concentrate our portfolio around businesses with long-lasting competitive advantage and to reinvest around those advantaged areas generating superior returns at meaningful scale," said Peter Vanacker, LyondellBasell chief executive officer. "These criteria have not changed."

The company's investments in a commercial-scale MoReTec plant, LyondellBasell's proprietary technology to convert plastic waste into liquid raw materials, and the development of a circularity hub in the Cologne, Germany region will continue as planned. LyondellBasell will also continue to invest and leverage its differential technology position as a key enabler to grow and upgrade the core asset base.

"The company will prioritize its investments to align operations with our circularity and net zero ambitions," Vanacker added. "We understand that strategic assessments can create uncertainty for our employees and customers, but we are committed to operate our assets safely and reliably throughout this process."

Source: LyondellBasell Corporate & Financial News, 8^th May 2024

#olefins #polyolefins  #europe  #assets  #circularity  #netzero  #plasticwaste