BP is set to face a potential $2 billion (£1.6 billion) impact from its ageing refining operations in Germany, compounded by weak oil trading that has affected its second-quarter earnings.
In a trading statement released today, the oil giant announced that its second-quarter results would include “post-tax adverse reporting items” related to the Gelsenkirchen refinery near Dortmund.
Constructed in 1935, the site comprises two plants and a petrochemical facility, enabling it to refine crude oil into fuels and various other products. However, its age and relatively small size render it more expensive to operate compared to global competitors. The refinery processes approximately 265,000 barrels of crude oil daily.
BP’s statement indicated: “The second-quarter results are expected to include post-tax adverse adjusting items related to asset impairments and associated onerous contract provisions in the range of $1 billion to $2 billion. This includes charges from the ongoing review of our Gelsenkirchen refinery in Germany.”
Last year, BP incurred a $1.3 billion impairment on the refinery due to “changes in economic assumptions,” as noted in its latest annual report. The company initiated a review of the refinery’s future in March this year.
This capacity reduction occurs as European refiners face increasing challenges from stringent environmental regulations, heightened overseas competition, and the rise in electric vehicle sales.
In January, Shell announced it would shut down its oil refinery in Wesseling, Germany, by 2025, converting the site to produce lubricant feedstock as part of its efforts to reduce carbon emissions.
