BP confronts financial impact from refinery changes, market conditions
(MENAFN) British energy giant BP has announced a projected financial setback of up to $2 billion following its decision to reduce oil refining operations in Germany. The company disclosed that its second-quarter results, anticipated by the end of July, will reflect a depreciation in value after taxes amounting to approximately one to two billion dollars.
The financial adjustment encompasses expenses related to the ongoing assessment of the Gelsenkirchen refinery in Germany, a decision first unveiled in March as part of BP's strategic business realignment. This announcement contributed to a 3.6 percent drop in BP's share price to 458p during early trading, marking it as the leading decliner on London's FTSE 100 index, which opened marginally lower overall.
The move to scale down operations at the Gelsenkirchen complex mirrors broader challenges facing European refiners, who confront escalating competition from imported fuels originating from the Middle East and Asia. These regions have been expanding their production capacities, posing intensified market pressures.
BP's restructuring efforts include plans for the Gelsenkirchen refinery to reduce its crude oil processing from 2025, aligning with similar initiatives by Shell at a neighboring facility and the planned closure of the Grangemouth site in the UK. Concurrently, other refineries like TotalEnergies’ Grandpuits are transitioning towards biofuels and plastic recycling to adapt to evolving market demands and sustainability goals.
In addition to the refinery adjustments, BP indicated that its upstream production in the second quarter is anticipated to remain relatively stable compared to the previous quarter, marking a more favorable outlook than earlier forecasts which projected a slight decline. Despite this improvement in production expectations, challenges persist in the company's gas marketing and trading segments, reflecting average performance levels.
Market analysts, such as RBC's Biraj Borkhataria, noted these dynamics in their assessments, underscoring both the resilience in production and the ongoing challenges in other operational areas. BP is scheduled to release its comprehensive second-quarter financial results on July 30, offering further insights into its financial performance and strategic adjustments amidst evolving market conditions.
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