National lockdowns across the world to contain the spread of Covid-19 has had a serious impact on global refinery sector. Stringent travel restrictions have wiped out the market for transportation fuel, long storage durations are leading to a deterioration of products such as gasoline and jet fuel and with stocks piling up and refiners are witnessing increased inventory costs. Such circumstances have forced the refinery sector to cut the production rate despite falling crude prices.
With global storages almost full and with hardly any sign of a pick-up in global fuel consumption, Marathon Petroleum has suspended operations in the Gallup refinery and reduced operations in two other refineries (Carson and Martinez) in the US. Similarly, European oil and gas giant Total SA has suspended two of its refineries in France, initially for scheduled maintenance and later indefinitely postponed their reopening due to prolonged fall in fuel demand.
SK Innovation Co Ltd, one of Asia’s largest refiners, is likely to cut operating rates at its 840,000 barrels per day (bpd) plant in South Korea by approximately two thirds. Reliance Industries Ltd, another key refiner from India, has reduced crude processing by almost a quarter due to lockdown and travel restrictions that have heavily impacted fuel demand.
To navigate successfully through the current market scenario, refinery operators may look at following strategies – building robust business continuity and contingency plan to ensure minimal impact on critical operations; identifying and resolving immediate challenges posed by Covid-19 to the company’s stakeholders; focusing more on remote operations through automation and digitalisation and less on people-intensive operations to tackle any such situations in the future; keeping operational readiness for new business opportunities, and being aware of and proactive to possible shifts in regulatory policies that might affect refinery markets.