UPDATE 1-SNAP ANALYSIS-French oil industry recovery to take time

Published 10/25/2010, 02:01 PM
Updated 10/25/2010, 02:21 PM
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* More strikes planned for late October, early November

* Refineries linked to Fos-Lavera port still dry

* Clearing crude backlog could take weeks

(Adds details in fifth paragraph on the affected plants)

By Emma Farge

LONDON, Oct 25 (Reuters) - France's oil industry is unlikely to make a swift return to normality even as some refineries prepar to return to work, given that more strikes are in the diary and workers continue to block a key port.

Workers at three of France's 12 refineries on Monday voted to lift blockades and restart operations after President Nicolas Sarkozy got Senate approval on Friday for a bill raising the eligible pension age by two years to 62.

The news raised hopes the sector would lurch back into action after a crippling strike, which has led to fuel shortages at a quarter of French petrol stations.

But while some traders said the worst was probably over, most traders and analysts were doubtful of a quick recovery as many strikers held firm. European oil product prices rose on Monday.

Workers at seven other French refineries voted on Monday to keep striking, including at all of Total's six plants and at the fuel depot linked to the LyondellBasell-owned Berre L'Etang plant in the south.

"Even if the legislation is fully passed and some refiners end the strike, some people may still continue to put pressure on the government to backpedal," said a crude oil trader.

"The guys already have two more nationwide protests scheduled," he added.

Unions have called for nationwide protests on Oct. 28 and again on Nov. 6 as they seek to maintain pressure on the government after the Senate approved the pensions bill on Friday, ahead of its final adoption due this week.

In September, before the strike had an effect on output, French refineries produced 1.557 million barrels of oil products a day, of which the majority was distillates such as diesel for cars and jet fuel for heating.

The production losses have not been specified by the French oil industry or the government but are estimated to cover a large share of potential output.

NO CRUDE

Two of the refineries that have voted to restart -- the Exxon Mobil-owned Fos-sur-mer plant and the Petroplus-owned Reichstett refinery -- are reliant on pipeline supplies from the blocked port of Fos-Lavera.

"If they end the strike, and they are 'at work' on Tuesday at Fos -- a refinery that can't work because it still has no crude -- then they can still keep France tight on products, but get paid," said an oil analyst and trader at a major bank.

"It's like being paid to strike."

Many see port workers at the Fos-Lavera terminal as more determined than the refinery workers, who joined more recently nearly two weeks ago when the national movement began.

Port workers at Fos have been on strike since Sept. 27 over port reform and were blocking 57 oil vessels on Monday, including 38 with crude oil and 19 carrying refined products.

Until work resumes at the Fos port, eight refineries in France, Switzerland and Germany will struggle to get supplies.

"I think the situation should calm gradually, but it will take two to three weeks for things to go back to normal," said Commerzbank analyst Carsten Fritsch.

"You can't be at full capacity from one day to another, and offloading takes time."

Restarting a refinery that has been shut for a while -- known as a "cold start" -- can take up to a week, oil product traders said.

A French shipping agent on Monday estimated it would take around 15 days to clear crude oil vessels waiting to unload at Fos-Lavera and a week to clear products.

The country's second-largest oil port, Le Havre in northern France, was also halted and 13 oil tankers blocked on Monday, port data showed.

Until refineries are back in working order, France will be forced to resort to stop-gap measures such as importing into smaller oil ports and across the German and Italian borders on barges, trucks and rail cars.

It had begun to import gasoline through the port of Rouen in northern France to relieve supply shortages. (Reporting by Emma Farge, Zaida Espana, Ikuko Kurahone and Dmitry Zhdannikov; editing by Jane Baird and Anthony Barker)

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