Royal Dutch Shell Group .com

Reuters: UPDATE 1-Shell winds down Europe's biggest refinery due strike: Tuesday 1 November 2005


By Nicola Leske


AMSTERDAM, Nov 1 (Reuters) - Oil major Shell (RDSa.AS: Quote, Profile, Research)(RDSb.L: Quote, Profile, Research) on Tuesday continued to scale down production at its Rotterdam refinery, Europe's biggest, potentially tightening pre-winter fuel supplies.


The strike, launched on Monday, was the first by Shell workers in the Netherlands since 1979.


Shell's 418,000-barrels-per-day Pernis refinery is a major supplier of transport and heating fuels to Europe and exports gasoline to the United States.


"They are scaling down in a very disciplined way in regard to safety, control and environment," a spokesman for Shell said.


Oil traders are closely monitoring developments at Pernis after Shell management let pass a deadline set by the unions to reach an agreement on Monday over pension demands.


The Dutch social ministry has said the government could not interfere and it was up to the two sides to solve the dispute. The parties could turn to the courts to seek a solution, a ministry spokesman said.


Traders have said the strike will not immediately create a fuel shortage, but if it drags on it could bite into stocks and hit supplies of winter heating oil and gasoline.


The strike will not completely shut down production at the Pernis refinery because of safety measures, trade union FNV said, adding that it could take two weeks for the refinery to be brought to a standstill.


European oil traders, however, expected the plant would be running at minimum levels in five days to a week. "They are not going to shut it down completely," one trader said. "They will bring it down to minimum levels and keep running some feedstocks."


The refinery would be able to return to full production more quickly if it continued to run at minimum levels during the strike than if it were shut down completely.


An FNV spokesman said it was too early to say how many people would join the protest over pension demands.


"They are signing up to join during the course of the day," he said.


Unions at the Pernis refinery, which employs 600 people, say they want no change to the company's present pension scheme, but Shell plans to raise the retirement age to 65 from 60 and force workers to contribute to their pensions.


Workers at Shell's 900,000 tonnes per year Dutch petrochemical cracker in Moerdijk also launched a strike, the FNV said. Some 200 people work there.


While potentially pushing up prices of refined oil products, a prolonged stoppage would also depress the price of the physical crude oil which feeds the plant.


Prices for gasoline in the Amsterdam-Rotterdam-Antwerp barge market rose by as much as $14 a tonne, reaching an intraday peak of $558 before slumping with futures markets. Prices are still a long way off a record high of $865 on September 1, just after Hurricane Katrina struck the U.S. Gulf coast.


Pernis refinery supplies motor fuels to inland European customers via the Amsterdam-Rotterdam-Antwerp barge markets, producing about 15,000 tonnes of gasoline per day.


Norwegian oil company Statoil (STL.OL: Quote, Profile, Research), which has a small equity stake in the refinery, was a prominent buyer on the gasoline barge market on Monday.


"They may be anticipating a lot of barges will be missing," another trader said.


Europe also played a key role in supplying gasoline and other motor fuels to the U.S. in September and October as hurricanes knocked out several U.S. Gulf refineries, taking a big chunk out of the country's fuel production.


(Additional reporting by Melissa Akin in London)    


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