The company informed refinery employees Oct. 20 it will begin a formal information and consultation process related to the reconfiguration, as required under French law, before the end of the year. The potential reconfiguration would impact about 120 out of 550 employees at the site, according to Petroplus.

In a statement, Petroplus CEO Jean-Paul Vettier said the company continues to improve the performance of its refineries through its three-year improvement plan. But it has become clear that the Petit Couronne refinery needs more structural changes to significantly improve its competitiveness in a very difficult refining market, Vettier stated. The reconfiguration would be a broad action plan which would result in improved reliability and cost structure, in addition to reduced working capital and capital expenditure needs. The clear target is to drastically reduce the break-even point of the refinery in the coming years.

It is no surprise Petroplus is pulling the plug on the base oil operation, said Stephen Ames, principal of SBA Consulting, Pepper Pike, Ohio. Ames explained that European fuel refining margins are poor, and the Petit Couronne refinery has lost money in the past year. Its the least profitable of the remaining five refineries Petroplus continues to operate, he said. They had already closed two others: Teesside in the U.K. and Reichstett in France, the latter was also acquired from Shell in 2008.

Petroplus was facing a 25 million (approximately U.S. $34 million) capital outlay for an upcoming maintenance turnaround of the base oil plant, Ames told Lube Report. The turnaround has now been canceled.

He noted that a base oil plant can make a refinery more expensive to operate. In addition to extra processing and associated costs, Group I operations require paraffinic lube crudes that often preclude the larger fuels side of the refinery from being optimized, Ames explained. Base oils constitute less than 10 percent of the refinery output and as a result can have an outsized impact on the overall refinery. In survival mode, a refiner cannot afford being limited in its choice of the all-important crude slate.

Ames pointed out that the former Shell Petit Couronne refinery and base oil plant produce Shell XHVI, a very high viscosity index Group III base oil, made from GTL wax from Shells Bintulu, Malaysia plant, along with other slack waxes. It is also manufactured at the Showa Shell Yokkaichi, Japan, base oil plant, he said. Those grades are no longer to be produced.

Prior to selling the refinery to Petroplus in early 2008, Shell had planned to close the Petit Couronne base oil plant once the Pearl GTL plant was online, Ames continued. After selling the refinery, Shell entered a base oil tolling arrangement with Petroplus for both the Group I and XHVI. The arrangement for Group I offtake was in declining annual amounts.

Petroplus Holdings AG claims to be the largest independent refiner and wholesaler of petroleum products in Europe. Petroplus owns and operates five refineries across Europe in five locations: Petit Couronne, France; Coryton, United Kingdom; Antwerp, Belgium; Ingolstadt, Germany; and Cressier, Switzerland.