Petrom to drop its chemical operations and cut its refining capacity

Petrom, the largest Romanian company, will completely withdraw from the chemical products market by the end of 2010, with the petroleum and gas producer being in the process of completing the transaction to sell the petrochemical operations of Arpechim refinery to state-held plant Oltchim.
The chemical and petrochemical segments do not account for more than 10% of Petrom’s annual turnover, which amounted to 4.5 billion euros last year. At the end of 2011, Arpechim’s fate will also be decided, with the refinery to operate only as necessary.
“In our effort to increase the worth of Petrom’s integrated operations, we decided to drop secondary operations,” says Mariana Gheorghe, Petrom’s CEO. The company says neither chemical nor petrochemical products are part of Petrom’s core activity, and that the profitability of these operations is very low under the current market conditions.
Petrom reported a 1.53 billion-RON net profit in the first nine months of this year, 33% less than in the same period of last year, and a 9.45 billion-RON turnover.
The company, which is the largest producer of petroleum and gas on the Romanian market, has also announced a radical change in its refining strategy over the next five years, going from expansion plans to strategies of cutting the capacity of Petrobrazi, the company’s biggest refinery.
The intention of OMV, Petrom’s majority shareholder, to make the refining segment secondary as far as investment priorities are concerned, has been announced recently, with the Austrians saying that exploration and production will be of primary importance.
OMV representatives said at the time that Europe now had an excess refining capacity, which would inevitably lead to several European refineries closing down. Although after the 2004 privatisation the Austrians’ plan was to boost the Petrobrazi refining capacity to 6 million tonnes a year from 4.5 million tonnes, the crisis prompted them to change their strategies, with Petrobrazi expected to have a 4.2 million-tonne capacity in 2014.