March 28, 2012:

OSLO –  Norwegian oil giant Statoil ASA (STO) is considering closing its Mongstad oil refinery on the west coast of Norway due to overcapacity in the market, higher crude oil costs, and lower margins, according to the Norwegian weekly Teknisk Ukeblad. The Mongstad refinery is 79% owned by Statoil and 21% by Royal Dutch Shell PLC (RDSA). It has a capacity of 10 million metric tons of crude annually, and is medium-sized in European terms, according to Statoil. Most of its products are exported to Europe.

Teknisk Ukeblad has obtained an email from Statoil asking for a meeting with the Norwegian Minister of Trade and Industry, where the company said that every possibility must be considered if it can't make the refinery profitable.  The refinery is affected by "a challenging market with low margins, a relatively high cost level," and increased taxes, said Statoil in the email.

The refinery has to pay a CO2 tax and a new electricity tax supporting renewable energy, adding NOK45 million extra in annual costs, and property taxes have increased to NOK90 million from NOK30 million annually, the weekly said.  "Mongstad can't be run with a deficit over time," said Statoil spokesman Morten Eek, as reported by the weekly.

By Down Jones Newswires