European refineries on sale

Several refineries are being sold in Europe — see table below based on Reuters data — because of moderating demand for fuels, the resulting overcapacity, growing share of biofuels, and anticipated expense associated with reducing carbon emissions.  It is interesting that most bidders are the emerging economies such as India, China, and Russia, where rapid economic growth will continue to drive demand for transportation fuels.

Deal pricing, however, has not dropped as much as one might have expected.  Lukoil’s purchase of a 45% stake in the Vlissingen refinery apparently cost $10,530 per barrel of installed capacity.  This is a trifle lower than the $11,000-12,000 paid during 2004-2007, the most recent golden age of refining.  Of course, building a new refinery still costs almost twice at about $20,000 per barrel of installed capacity, unless you are Reliance, which built its 660,000 bpd refinery for less than $9,000 per barrel of installed capacity.