ExxonMobil has postponed construction of its $1 billion-plus Fawley Strategy (FAST) project intended to boost diesel output at the 270,000-b/d U.K. refinery until 2025 at the earliest, sources with links to the plant have told OPIS, throwing into doubt the future of one of the largest ever expansions of a British oil refinery.

"They are now talking about doing it in 2025," a source at Fawley said with respect to senior management at ExxonMobil. "Whether it will ever be going ahead, we're beginning to wonder," the source added. The FAST project is intended to boost diesel output at Fawley by 38,000 b/d.

On-site construction of a hydrotreater and hydrogen plant at the U.K.'s largest oil refinery was originally due to begin this year, but FAST was subject to successive postponements and the project's principal contractor, American construction giant Fluor, was relieved of its services earlier this year, OPIS reported in September.

Sources at Fawley say that ExxonMobil was still committed as recently as this summer to beginning on-site construction of the two new units in the fourth quarter of 2021, with completion of the work anticipated to take approximately a year. ExxonMobil was considering bringing the work in-house and hiring new contractors, according to those sources.

However, the company has since announced a further round of cuts to capital expenditure from a planned annual capex of $30-35 billion to $20-25 billion a year until 2025 in addition to an approximate 15% reduction in employee and contractor headcount.

The cuts follow a dismal year for the company, which has seen three successive quarters of losses and a 40% slide in its share price. The Fawley refinery has contributed to those losses, say sources there, who estimate the refinery's year-to-date operating loss at around $120 million, although a strong performance at the neighboring chemicals plants at Fawley has helped to offset that loss, according to sources with knowledge of the integrated site. Slumping refining margins in Europe due to reduced demand for oil products caused by the COVID-19 pandemic resulted in the refinery operating at just above 60% of capacity over January-August.

When asked to confirm the postponement to 2025 and to reaffirm the company's commitment to the FAST project, a spokesman for ExxonMobil in Europe told OPIS: "ExxonMobil is looking to significantly reduce spending as a result of market conditions caused by the COVID-19 pandemic and commodity price decreases."

"Timing of expansion plans for select downstream and chemical facilities across the company's portfolio will be adjusted to capture efficiencies, slow spending pace and better align with a return in commodity demand. We're not commenting on the status of individual projects at this time," the spokesman said.

A resumption of the project in 2025 would likely see a completion in 2026 - just four years before the U.K. is due to ban the sale of cars and vans powered entirely by diesel and gasoline.

Significant parts of the FAST project's two units have already been constructed off-site before being shipped to Fawley. Fluor began constructing the project's 1,300-ton process column at one of its bases in India early last year, even though FAST had yet to receive planning permission from the relevant local government authority in the U.K. That permission was later granted by New Forest District Council in September last year.

The tower has been held in storage at the site, a source told OPIS last week. "They've had a 1,300-ton tower just lying there...it's not clear if it will ever be put up," the source said.

 

--Reporting by Anthony Lane, alane@opisnet.com;

--Editing by Rob Sheridan, rob.sheridan@ihsmarkit.com

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