ExxonMobil Corp. (XOM) is to plow over $1 billion into its refinery in Antwerp, Belgium, in an effort to squeeze cleaner and more valuable products out of one its oldest plants.
The investment is an eyebrow-raiser because big oil has been shuttering refining operations in Europe as fast as it can over the last couple of years, in response to chronic weak demand as a result of the crisis, tighter environmental regulation that has driven energy costs up, and, most of all, the creation of huge over-supply as more and more refineries have been built closer to the emerging markets they serve.
It’s also surprising because ExxonMobil has been retrenching in Europe. It said in February it wanted to sell some 200 gas stations in the U.K. and reportedly looked at getting rid of its network of gas stations in Germany.
ExxonMobil said it would build a new ‘delayed coker’ unit in Antwerp that can convert low-value, high-polluting products such as bitumen and high-sulfur marine fuel oil into cleaner products such as diesel and lower-sulfur marine fuel.
Exxon said there would be more such announcements in future, noting that the project “is the first of several being evaluated to further strengthen strategic refineries in Europe to more successfully face the challenging industry environment.”
Diesel in particular is a product where demand in Europe is still robust, thanks to an E.U. environmental policy that promotes its use over gasoline due to the conviction–based on now largely discredited research–that it produces fewer climate-changing gases when burnt.
Exxon’s investment plans are also in part an attempt to anticipate other developments in E.U. policy. The 28-country bloc is planning to tighten fuel-quality rules for shipping fuel, which would make it harder for the Antwerp refinery to sell its existing marine fuel.
Exxon is the second oil major this year to announce big investments in Antwerp, which has traditionally been one of the gateways to the richest regions of Europe. France’s Total SA (TOT) made a similar announcement in May.