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Global Processing e-News / Oil & Gas / Oil & Gas / Europe

European pipelines fighting for clients

February 11, 2013

Competition among key European oil pipeline operators is more fierce than ever, as the number of clients declines, amid other concerns including economic instability and the occasional fuel shortage. Two of the biggest pipeline operators on the continent -- French South European Pipeline (SPSE), which carries oil to plants in France, Germany and Switzerland, on the one hand, and the Transalpine Pipeline (TAL), providing oil to Germany, Austria and the Czech Republic, on the other -- are in the middle of a major conflict, Reuters reported.

Recently, a wave of clients left SPSE, most of whom have turned to TAL. This move is likely to spell the end of the French pipeline, according to Fluxel, a shareholder in SPSE and operator of the oil port Fos-Lavera, near Marseille. In a letter to TAL obtained by Reuters, Fluxel's President Michel Peronnet wrote that if volumes did not return to their previous levels, the situation might deteriorate further and put the existence of the two refiners in France and Switzerland still supplied by SPSE at risk. The current situation has become "unbearable" and immediate actions are needed, he wrote. When contacted by Reuters, Peronnet refused to discuss the matter. Both TAL and SPSE also declined to comment.

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Although competition between pipelines on both sides of the Atlantic is becoming more fierce, the reasons that have led to this are very different in the United States and Europe. While the U.S. natural gas and oil industry is flourishing, thanks to increased production, leaving a myriad of shippers to battle for limited pipeline capacity, Europe is suffering from decreasing demand and refining closures, causing pipelines to struggle to attract clients.

Over the past few years, a number of refineries have had to close operations because of the drastic fall in fuel consumption in Europe, due to a combination of factors, including better fuel efficiency and sluggish economic growth. The conflict between TAL and SPSE started in August 2012, when the MIRO refinery in Karlsruhe, Germany decided to abandon SPSE after a five-decade collaboration and started working with TAL, which supplies oil from the Trieste port in Italy. As a result of just one refinery leaving SPSE, the pipeline lost 30 oil tankers in traffic between August and November 2012, Peronnet wrote in his letter.

MIRO, Germany's largest refinery, is owned by Phillips 66, ExxonMobil, BP, Rosneft and Royal Dutch Shell. According to sources from the refinery quoted by Reuters, the transition to TAL was driven by the fact that the pipeline offered lower shipping fees. However, Perronet argued that these lower fees were only possible because TAL abused its dominant position in the region and charged higher on other routes towards other refiners. TAL told Reuters that the fees charged for shipping were confidential and it could not comment on them.

With its new clients, the TAL pipeline has become so busy that last year it could not supply refineries in the Czech Republic due to limited capacity, raising concerns about its reliability.

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