BP to Reduce Gelsenkirchen Refinery Capacity Amid Demand Shift
BP plc BP plans to reduce the crude processing capacity of its Gelsenkirchen oil refinery in Germany by approximately one-third from 2025, citing a subdued demand outlook, on Wednesday, per a Reuters report.
The decision to reduce capacity comes against the backdrop of mounting challenges faced by European refiners, including stringent environmental regulations, intensifying overseas competition and the surge in electric vehicle sales.
Speaking at the CERAWeek energy conference, Amber Russell, the head of refining at BP, highlighted the significant decline in demand projected for Germany, prompting BP to reassess its operational strategy. The Gelsenkirchen refinery, established in 1935 and comprising two plants along with a petrochemicals site, faces structural challenges that contribute to its high operational costs.
Currently, the refinery, located in western Germany, has a crude oil processing capacity of 265,000 barrels per day, a figure that will be slashed by approximately one-third. Additionally, starting in 2025, the refinery will ramp up its biofuels processing capabilities.
Per the report, a spokesperson for BP confirmed that the reduction is slated to commence in 2025 and emphasized the company's commitment to incorporating biofuels into its operations.
The decision to scale down operations at Gelsenkirchen follows a $1.34 billion impairment recorded by BP in 2023, reflecting changes in economic assumptions. This adjustment highlights the challenges faced by traditional oil refineries amid shifting market trends and regulatory pressures.
Zacks Rank & Key Picks
BP currently carries a Zack Rank #3 (Hold).
Some better-ranked stocks in the energy sector are Sunoco LP SUN, Murphy USA Inc. MUSA and Energy Transfer LP ET. While Sunoco and Murphy USA sport a Zacks Rank #1 (Strong Buy) each, Energy Transfer carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Sunoco is among the biggest motor fuel distributors in the U.S. wholesale market in terms of volumes. By distributing more than 10 fuel brands via 10,000 convenience stores under long-term distribution contracts, the partnership will continue to generate stable cash flow.
The Zacks Consensus Estimate for SUN’s 2024 earnings per share (EPS) is pegged at $4.87. The stock has witnessed upward earnings estimate revisions for 2024 and 2025 in the past 30 days.
Murphy USA is a leading independent retailer of motor fuel and convenience merchandise in the United States.
The Zacks Consensus Estimate for MUSA’s 2024 EPS is pegged at $26.01. The company has a Zacks Style Score of B for Growth and B for Value. It has witnessed upward earnings estimate revisions for 2024 and 2025 in the past 30 days.
Energy Transfer is a publicly traded limited partnership, focused on diverse energy assets in the United States. The company’s core operations involve natural gas midstream services, transportation, storage, crude oil facilities and marketing assets.
The Zacks Consensus Estimate for ET’s 2024 earnings per unit is pegged at $1.44. The company has witnessed upward earnings estimate revisions for 2024 in the past 30 days. ET’s 2024 earnings are expected to rise 32.1% year over year.
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