Background.

Three of Total’s five refineries in France—Gonfreville in Normandy, Grandpuits in the Paris region and Feyzin near Lyon—demonstrated their ability to withstand the deteriorating economic environment in 2013 and 2014 and generate ongoing income streams. The other two, Donges and La Mède, are struggling and are structurally loss-making. To address the situation, Total developed a comprehensive plan to improve both refineries’ performances and secure their long-term future.

There are three possible responses to the crisis in the European refining industry. The first is to throw in the towel. The second is to do nothing and perish. The third is to innovate and adapt to meet shifting demand trends. The central focus of Total’s plan for our French refining business is to realign our operations and products to changing markets. The plan that we are presenting today offers sustainable solutions for the Donges and La Mède refineries. It gives both facilities a future and strengthens Total’s refining base in France.

—Patrick Pouyanné, Chief Executive Officer of Total

European demand for petroleum products has declined 15% since 2008, shrinking outlets for the continent’s refining industry. This underlying trend stems from pursuit of energy efficiency and improved vehicle fuel economy as part of the European Union's commitment to reducing its carbon footprint.

The European market is steadily contracting, a situation aggravated by the shale oil and gas revolution in the United States, which gives the US refining industry an advantage, and competition from refineries in Asia and the Middle East. These two trends shut European refineries out of some of their domestic and export markets and have exacerbated excess refining capacity in Europe.

Total is continuing to adjust its production base in France, following the shutdown of the Flandres refinery (2010), the upgrade to the Normandy refining & petrochemicals platform (2012) with an investment close to €1 billion and the implementation of the project to secure Carling’s future (2015).

Including the adaptation plan for the Lindsey Oil Refinery in the United Kingdom announced earlier this year, Total will have successfully adapted by 2017 its European refining base to the market and cut its refining and petrochemical capacity by 20% in Europe in 2017, as announced in 2012.

La Mède. In order to sustainably restore the competitiveness of its La Mède site, Total will transform some existing units for activities with strong future prospects. The Group will also maintain certain petroleum product refining operations, but halt processing of crude oil, which is reporting heavy losses, at end-2016.

Axens’ Vegan process. Click to enlarge.

The site’s flagship operation will be a world-class, 500,000-ton-per-year biorefinery that will manufacture renewable diesel primarily from used oils, as well as renewable feedstock. The hydrotreated vegetable oil (HVO) process selected by Total is a French technology developed by Axens (marketed as Vegan) that produces high-quality renewable diesel blendstock that is easily blended into regular diesel in any proportion, with no adverse impact on fuel quality or engines.

A European Union directive sets a target of 10% renewables in transportation in 2020. In France, the draft bill on the energy transition toward green growth calls for increasing the share of biofuels to 15% in 2030 from 7.7% today.

La Mède’s transformation reflects Total’s determination to play an active role in the development of renewable energies, especially biomass, which will be needed to combine with fossil fuels to meet energy demand while at the same time mitigating carbon dioxide emissions.

While some of the site’s units are transformed and crude oil refining is halted, Total will maintain profitable refining activities and develop new ones:

• Continuing to operate certain existing refining units (naphtha reformer) to produce the hydrogen needed for biorefining. The existing synergies between La Mède, Naphtachimie and local petrochemical operations will be maintained and Total is confirming its lasting commitment to Naphtachimie, a 50-50 joint venture with Ineos. The Group will also expand its production of jet fuel for civil aviation, targeting a 30% share of the overall European market from the la Mède site.

• Developing a logistics and storage hub (capacity of 1.3 million cubic meters) dedicated to refined product trading operations and supplying Total customers. The hub will generate business for the Port of Marseille Fos.

• Building an 8 MW solar farm using technology developed by Total affiliate SunPower, to meet 50% of the site’s power needs.

• Building a unit to produce AdBlue for SCR.

• Following in the footsteps of the successful Oleum training school created as part of the transformation of the Dunkirk site, setting up Oleum South, a center with full-scale instructional facilities that will provide training in exploration and production professions, working in partnership with French public research, innovation and training center IFP Training.

Of the 430 jobs currently at the La Mède site, 250 will be maintained.

Donges. Total will build units at Donges to win new markets for the site in Europe. The construction of new refining units on the site will go together with the rerouting of an existing rail line that cuts through the refinery and adversely impacts its competitiveness.

Currently, the Donges refinery lacks desulfurization capacity. That means that a significant proportion of its fuels are exported, because they no longer meet the evolutions of European Union specifications. This situation undercuts the economics of the Donges facility. To ensure new markets for the site, the project entails building:

• A new desulfurization unit for intermediate feedstock used to produce low-sulfur fuels that meet the evolution of EU specifications.

• A steam methane reformer (SMR) to produce hydrogen needed for the desulfurization unit. The SMR will be built by a contractor under a long-term hydrogen supply contract with the refinery.