Communicator

Lindsey Refinery was placed into insolvency | Photo: Mike Seaman, shutterstock.com

30^th June 2025

Europe’s Industrial Backbone Shattered: Lindsey Refinery Collapse Signals Petrochemical Exodus

A wave of closures is decimating the landscape of Europe’s refining and petrochemical industry. The collapse of the UK’s Lindsey oil refinery—one of the country’s last major refining assets—has thrown 420 jobs into immediate jeopardy and sent shockwaves through the sector. This dramatic shutdown is only the latest in a series of high-profile exits that underscore the existential crisis facing European refining. Just weeks prior, Scotland’s Grangemouth refinery—after a century of operation—ceased crude processing, transitioning to an import terminal and marking the end of oil refining in the country. Meanwhile, SABIC’s decision to shutter its Olefins 6 steam cracker at Wilton, Teesside, after 46 years, has sent further tremors through the sector, with hundreds of jobs in jeopardy.

No Profits, No Future: Lindsey Refinery’s Struggles Under Prax Ownership

The Lindsey Oil Refinery’s descent into insolvency starkly illustrates the vulnerability of small-scale refineries in today’s fiercely competitive market. With a capacity of 113,000 barrels per day, Lindsey is one of the UK’s smallest remaining refineries, and it has struggled to compete against the economies of scale enjoyed by much larger, more modern facilities elsewhere. Persistent financial losses—totaling around £75 million since Prax acquired the site in 2021—ultimately forced the refinery’s owner to seek administration, putting 420 jobs at risk and threatening to deepen the UK’s reliance on imported fuels. The government, left with little time to intervene, has called for an immediate inquiry into the circumstances behind the collapse, underscoring the systemic challenges faced by smaller refineries in an era of global oversupply and razor-thin margins.

The Rationalization Imperative

These closures are not isolated incidents but part of a broader rationalization of Europe’s olefins and refining capacity. The continent’s steam crackers—once the backbone of its chemical industry—are under siege from a perfect storm: high energy and feedstock costs, weak demand, and a global supply glut exacerbated by massive capacity expansions in China. Naphtha, the main feedstock for European crackers, is costly and less efficient compared to ethane, which dominates in the US and Middle East. Naphtha crackers typically achieve only about 50% olefin yield (ethylene, propylene and butenes), while ethane crackers can reach 80% of ethylene alone—a stark difference in a margin-driven business.

Feedstock-dependent Cracking Yields (in weight-%)

The numbers tell the story. Since April 2024, six European crackers have been closed or marked for closure, including ExxonMobil’s Notre Dame de Gravenchon (France), SABIC’s Geleen (Netherlands), and now Wilton (UK). TotalEnergies is set to shut its oldest Antwerp cracker by 2027, citing a “significant surplus of ethylene expected in Europe”. The cumulative ethylene capacity lost from these moves reaches 4.35 million metric tonnes per year over the 2020 to 2027 time period, representing 17.2% of the 25.3 million metric tonnes installed ethylene capacity according to the Petrochemicals Europe database. Meanwhile, there is only one single project scheduled for start-up in 2026, INEO's Project ONE ethane cracker in Antwerp, Belgium, which will add 2 million tonnes of olefins (ethylene and propylene) annually.

Competitive Pressures and Strategic Failures

Europe’s chemical industry is caught in a vice. On one side, it faces relentless competition from regions with lower feedstock and energy costs. On the other, it suffers from stagnant demand at home, with key downstream sectors like automotive in decline and regulatory changes further eroding traditional markets for naphtha cracker byproducts. The result: margins for naphtha crackers have turned weak or negative, with spreads hovering around $200/ton—a level insufficient to justify reinvestment.

Historical and forward European steam cracker margins (US $/metric tonne) | Sparta, 29 August 2024

While Asian and Middle Eastern players have invested in feedstock flexibility and integration—the former converting naphtha crackers to ethane, the latter building up mega scale ethane cracking capacities—Europe has lagged. The region’s fragmented, aging asset base is often poorly integrated, with many sites requiring major capital just to meet new environmental standards. Strategic reviews and divestments are accelerating, with companies like SABIC openly contemplating a full or partial exit from the European market.

Policy Response and the Road Ahead

The European Commission acknowledges the urgency. High-level dialogues are underway to address the competitiveness crisis, with a focus on modernization, simplification, and financing rather than new regulation. Yet, the challenge is formidable. Many of Europe’s steam crackers are over 40 years old—environmentally inefficient and under-performing by global standards. Without bold action, the risk is not just further closures, but the hollowing out of the region’s industrial base and a growing reliance on imports for both fuels and chemicals.

Portfolio Planning PLUS Perspective

For market participants, the implications are clear:

• Asset rationalization will continue: More closures are likely as companies seek to stem losses and reallocate capital.
• Integration and feedstock flexibility are critical: Survivors will be those who can pivot to lower-cost, more sustainable operations—mirroring the successes seen in Asia and the Middle East.
• Import dependence will rise: Europe is expected to import 15–20% of its ethylene needs in the coming years, reversing decades of self-sufficiency.
• Workforce and community impacts are severe: Each closure brings not just economic loss, but social and political fallout, as seen in Grangemouth and Teesside.

Outlook

The European chemical industry stands at a crossroads. Without decisive investment, integration, and policy support, the current wave of closures may prove to be only the beginning of a deeper transformation—one that will redefine Europe’s place in the global petrochemical value chain for years to come.

#prax #sabic #totalenergies #exxonmobil #lyondellbasell #ineos #repsol #versalis #refining #steamcracker #feedstock

The Berre petrochemical plant is one of the sites involved in exclusive sales negotiations between LyondellBasell and Aequita | PHOTO: Frédéric SPEICH, La Provence

LyondellBasell’s (LYB) agreement to divest four major European production sites to AEQUITA marks a pivotal moment not only for the company but for the continent’s entire petrochemical sector. The transaction, encompassing plants in France (Berre), Germany (Münchsmünster), the UK (Carrington), and Spain (Tarragona), is emblematic of a broader industry shift as producers grapple with persistent overcapacity, high costs, and the need for structural transformation.



LyondellBasell Transaction Footprint | Jun 5, 2025 | LyondellBasell Investors Presentation

Strategic Rationale: From Rationalization to Refocus

LYB’s decision to sell these assets is rooted in a deliberate strategy to sharpen its operational focus and enhance profitability. The divested sites, which together account for roughly 1.4 million tonnes per year of polyolefins and olefins output, have delivered only modest returns while consuming significant capital—averaging €110 million in annual capex from 2020 to 2024. By transferring these facilities to AEQUITA, LYB expects to reduce its fixed costs by approximately €400 million per year and reallocate capital toward its most competitive and sustainable European operations.

Notably, this move is not an isolated event. LYB’s review initially spanned six sites, including Brindisi (Italy)—where one polypropylene plant has already been shuttered—and Maasvlakte (Netherlands), a joint venture (with Covestro) asset not included in the AEQUITA deal. This highlights the depth of LYB’s strategic review and underscores the scale of rationalization underway across the region.

Industry Context: A Wave of Closures and Consolidation

LYB’s asset sale is part of a much larger trend. European petrochemical producers are facing unprecedented headwinds: high energy costs, aging infrastructure, tightening environmental regulations, and lackluster demand. Other industry leaders, such as ExxonMobil, Sabic, and Indorama Ventures, have also closed or downsized European operations in the past year. Ultimately, up to half of the continent’s ethylene crackers could ultimately face closure, as the economics of small, old plants become increasingly untenable.

This rationalization wave is not simply a response to cyclical weakness but a recognition of structural change. Freight disruptions and temporary supply shocks have only delayed the inevitable need for consolidation and transformation.


LyondellBasell' Assets for Sale | Jun 5, 2025 | LyondellBasell Investors Presentation

Deal Structure and Financial Terms

The transaction with AEQUITA is structured to enable a smooth transition:

• LYB will contribute €265 million (of a €275 million carve-out support fund) to facilitate the separation, with AEQUITA providing €10 million.
• LYB stands to receive up to €100 million in earnouts over three years.
• AEQUITA will assume approximately €150 million in pension and employee liabilities, as well as all environmental obligations.
• The deal is expected to close in the first half of 2026, subject to regulatory and works council approvals.

Importantly, LYB’s exit from these sites will also spare it from the need to invest hundreds of millions in decarbonization upgrades, particularly at Berre and Münchsmünster, where meeting 2030 emissions targets would have required major capital outlays.

LYB’s European Commitment: Core Sites and Circular Ambitions

Despite the high-profile asset sale, LYB has made clear that Europe remains a core region. The company’s retained portfolio includes technologically advanced and economically advantaged sites in Ferrara, Frankfurt, Ludwigshafen, and Rotterdam, as well as integrated supply hubs in Cologne and specialty operations in APS. These facilities are positioned to support LYB’s ambitions in circular and low-carbon solutions, including advanced recycling (MoReTec) and the CirculenRecover product line.

LYB’s future European footprint will be more focused, with a higher share of capacity in cost-advantaged regions (U.S. and Middle East), rising from 61% to 68% post-transaction. The company is also stepping up investment in recycling and circular economy initiatives at its core sites, aiming to deliver 2 million tonnes per year of recycled and renewable polymers by 2030.

Market Implications and Competitive Dynamics

LYB’s withdrawal from these European assets will reshape the regional supply landscape, opening opportunities for Middle Eastern and Asian exporters to increase their market share. The move also contrasts with the strategies of some competitors, such as SABIC, which is expanding its footprint in Asia. For LYB, the divestment enables a sharper focus on direct customers, brand owners, and high-growth segments, while freeing up resources for innovation and portfolio upgrades.

Berre Petrochemical Cluster Process Flow Diagram | ppPLUS Interactive Visualization Tool

Outlook: More Closures Ahead

The European petrochemical sector is entering a “new normal” characterized by ongoing rationalization. With many crackers and polymer plants facing existential threats due to age, size, and economics, further closures are likely. LYB’s asset sale could be a bellwether for additional portfolio actions across the industry.

How ppPLUS Can Help

For investors and stakeholders evaluating LyondellBasell’s divested assets, Portfolio Planning PLUS (ppPLUS) offers tailored economic modelling capabilities to assess risks, opportunities, and transaction value. ppPLUS specializes in developing site-specific models that integrate:

Asset configurations: Detailed analysis of production units, technologies (e.g., Steam Crackers at Berre and Münchmünster, Novolen Gas-Phase PP at Tarragona, Hostalen ACP HDPE at Münchsmünster, Lupotech T LDPE and Spheripol Bulk-Slurry PP at Berre), and feedstock flexibility.
Capacity utilization: Scenario-based projections accounting for market demand, regulatory constraints, and operational synergies.
Financial and operational metrics: Capex/opex forecasting, decarbonization cost avoidance, and liability assumptions (e.g., pensions, environmental obligations).

Using ppPLUS’s interactive platform, users can:

• Generate gross margin models for individual sites or combined portfolios.
• Simulate the impact of energy price volatility, carbon pricing, and feedstock availability.
• Benchmark asset performance against industry standards and regional competitors.

ppPLUS’s tools align with global best practices in economic modelling, including compliance with frameworks like the UK’s TAG M5.3 supplementary economic modelling guidelines for rigorous validation and scenario testing.

Explore ppPLUS’s asset-specific insights:

• Berre, France
• Münchsmünster, Germany
• Carrington, UK
• Tarragona, Spain

Contact ppPLUS to leverage its expertise in petrochemical asset valuation, strategic due diligence, and regulatory risk assessment for informed decision-making in this transformative transaction.

#portfolioplanningplus #ppplus #transactions #divestment #marginanalysis #economicmodelling #capacityutilization #opex #capex #lyondellbasell #sabic #indorama #ineos #exxonmobil #aequita #aramco