Management of Hungarian MOL has announced the possibility of a closure of one refinery of the Croatian oil company INA, which is in their ownership. The possibility of the closure of one of the INA’s refineries, with regard to decline in market demand for oil products and non-profitability of refinery’s operations, consider some of the oil experts, while the others consider that the INA’s refineries could be profitable being modernized and returned in traditional INA markets in Croatia and neighboring countries.
The possibility of shutting down of one refinery, has mentioned a member of the Board of the Mol company, Ferenc Horvat in an interview for the “Vecernji list”, while explaining that refineries have surplus of capacity for the market.
The oil consultant and former head of the INA Davor Stern considers that a decision on the future of the refineries should be made by Management Board of INA based on professional rather than political assessments and indicators, and that decision should be represented at the shareholder as well.
Stern warns that because the decline in industrial consumption and decrease of consumption of oil derivates, the INA’s refineries currently have overcapacity. It is, says Stern, similar to the general situation in Europe, where companies are faced with surplus of refineries’ capacity.
In light of the current announcements with the possibility of closing one of the refineries, most frequently mentioned Sisak, Stern says that the current investment in that refinery cannot be justified. However, is not a reason or excuse for the lack of investment in INA because the company has a lot of matters which should be improved.
Expert in the refinery business and the former head of refining at INA, Emir Ceric also considers the possibility of the refinery’s closure realistic, according to the loss of markets and the decline in consumption. Borderline level of profitability of the refinery operation is processing of 4.5 to 5 million tons per year, considering that a very little or no share of refining products which are related to the fuel oil, said Ceric
He believes that this level could be reached by refinery in Rijeka, if modernized, but notes it very unlikely to happen.
He explains that the Hungarians from the beginning of their involvement in INA, and especially since they have a key management rights, observe INA as part of MOL and at the level of MOL but not at INA’s, they optimize refineries processing. This means that they are processing only where there is a possibility of “deep” processing to obtain large quantities of high-quality derivatives, and this is not the case of INA refineries, says Ceric. The profitability of INA’s refineries was possible with the price of oil of 60 dollars per barrel, and now it’s around 100 dollars, he added. He mentioned also the large fixed costs of INA’s refineries resulting from overstaffing and high personal consumption. The solution for INA according his opinion, finishing of modernization of refinery in Rijeka, which would in accordance with penetration in Slovenian and Bosnia and Herzegovina’s markets, could ensure profitability. In terms of the Sisak refinery, he is pessimistic. He believes that it could be closed, as well as the refinery in Bosanski Brod, because modernized refineries in Rijeka and Pancevo would be sufficient for the markets of the former Yugoslavia.
On the other hand, the experts circles due to the nature of their current engagement do not want to be named, evaluate arguments about nonprofit ability of refinery’s business in Croatia consider them not accurate. They recall that the Mol should take and share the financial burden of reconstruction and modernization of INA’s refineries, as well as the renewal of the Sisak refinery which should have been completed in 2008, and the Rijeka Refinery in 2006.
That it was not done, but instead, Mol bought the refinery in Italian Mantova, which was closed later.
The sources of agency Hina also do not match with the argument that the INA’s refineries have overcapacity due to market demand, and remind us that Ina imports derivates from Hungary, whose processing in Croatia is not worth it, supposedly.
The Croatian Academy of Sciences and Arts (CASA) has announced recently regarding the damage because of the lack of modernization of INA’s refineries; they organized a round table where the damage caused from the lack of refinery modernization of INA was estimated. The modernization of INA’s refineries was contracted with the company MOL, and it is measuring in billions of dollars.
Longtime manager of refinery’s activities in INA, Ivica Bileg, reminded at the forum HAZU, that in Rijeka Refinery are completed only the first two phases of the planned modernization and in Sisak are realized some of the first phase.
He believes that this can be linked to “attractive alternative” that Mol has in developing its own refineries. Bileg calculates the total profit of INA’s modernized refineries would be approximately 380 million dollars annually. Besides, he considers restoring the former INA market share in Croatia and abroad, could be relatively done easily and it would be profitable for INA with 10% damping.
However, the chief economist in INA Goran Šaravanja, at the same forum, warned that Ina faced falling market demand because of five-year recession and he wondering if there was a need the refineries operating at full capacity and where to sell these quantities? He argues that the INA from 2008 until nowadays in the development of the refining system in Rijeka and Sisak invested 655 million euros.
Source; Serbia Energy See Desk
