European refiners cut gas use to weather crunch

A Shell logo is pictured during the European Business Aviation Convention & Exhibition (EBACE) in Geneva, Switzerland, May 23, 2022. REUTERS/Denis Balibouse

July 28 (Reuters) – Oil refiners Shell (SHEL.L) and Repsol (REP.MC) have slashed their use of natural gas at European sites as the region looks to curb demand in case of further supply disruptions from long-time major provider Russia.

A squeeze on flows through the Nord Stream 1 pipeline to Germany has pushed the European Union to ask countries to save gas and store it up for winter, fearing Russia will cut supplies entirely in retaliation for sanctions over the war in Ukraine. read more

As well as being burned for heating and power generation, gas has an important role in refining crude oil into products such as gasoline, jet fuel or diesel.

Shell (SHEL.L) has slashed its use at Europe’s largest oil refinery, Rotterdam’s 404,000 barrel per day Pernis site, by 40% and at its German refineries by 70% in light of the crunch, its chief executive said.

“These are very material reductions of a material stream and very welcomed therefore as we prepare for winter,” CEO Ben van Beurden told reporters.

Further south in Spain, oil and gas group Repsol (REP.MC) has cut its use of gas at refineries by 1 billion cubic metres (bcm), Chief Executive Josu Jon Imaz said.

“We are working hard to focus on security of supply and for that reason we have started to reduce in a dramatic way the gas consumption in our refineries, in our industries,” Imaz told analysts on a conference call.

Benchmark European natural gas prices and global liquefied natural gas (LNG) average prices were at record highs in the second quarter of 2022.

Repsol was able to make the reduction, which represents 3% of total Spanish gas consumption, through measures including substituting naphtha and LPG (liquefied petroleum gas) for natural gas in hydrogen plants, Imaz said.

“One bcm is a huge figure,” he added.

Van Beurden said the reduction in gas intake at Shell’s refineries would not affect their output and stems from engineering changes in the use of oil feedstocks.

“We use basically gas that has been produced out of the oil intake to fire some of these furnaces. So in other words it is self-help,” he said, adding: “We probably can go a bit further.”

Reporting by Isla Binnie, Shadia Nasralla and Ron Bousso; editing by Jason Neely and Susan Fenton

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