Barcelona (Platts)--23May2012/750 am EDT/1150 GMT

Europe's long-suffering refining industry is facing a new threat from the boom in US shale oil and gas which could see a surge in US light fuel production erode Europe's traditional export market for gasoline, the deputy head of Europe's refining industry association Europia said Wednesday.

US liquids production could grow by almost 2 million b/d to some 9.4 million b/d in 2015 helped by the country's surging number of tight oil projects producing super-light crudes and condensates, according to recent estimates by energy analysts Wood Mackenzie.

With many Midwest US refiners able to source the new crudes, and helped by cheap shale gas, domestic US gasoline production is expected to meet a growing proportion of the US' gasoline supply deficit.

With the cheap, abundant crude sources available to parts of the US refining sector, European plants could see a loss of their competitive edge supplying the US markets, Europia's Chris Beddoes said.

"I think there is still a battle ground in the Atlantic Basin, between refineries on the northeast coast of the US and Europe for the gasoline markets in particular," Beddoes told a refining conference in Barcelona.

"But if we lose our gasoline market as a result of these changes then we are going to really struggle to rebalance our barrel... so it could be another game changer if it really takes off in the United States," he said.

Many European refineries have seen their competitiveness linked to exporting gasoline overproduction to the US in recent years despite road fuel demand peaking on both sides of Atlantic.

The threat from US shale oil comes after years of European refiners spending billions of euros on their plants to process heavier crudes and feedstocks to meet Europe's growing demand for diesel.

Much of the spending on hydrocracking and coking capacity in Europe has come on the expectations of heavier, higher sulfur crudes in the future as lighter crudes from the North Sea, Nigeria, and Libya begin to plateau or decline.

Beddoes said, however, Europia has yet to model whether possible future exports of US super-light crude sources to Europe could become a further burden to the region's diesel-oriented plants.

Last week, Barclays Capital oil analyst Amrita Sen said the dire refining margins being suffered by European players and many East Coast US refiners could be exacerbated by the need to source more costly crude from further afield in coming years.

Sen said she believes that US super-light crudes and the loss of traditional crudes from the North Sea and Africa is creating a mismatch of refining capacity between Europe and the US.

--Robert Perkins, robert_perkins@platts.com
--Edited by Alisdair Bowles, alisdair_bowles@platts.com

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