April 17, 2012:

LONDON - Italian oil and gas group Eni will proceed with a partial and temporary stoppage of its Sicilian refinery at Gela as weak demand and overcapacity in the sector take their toll. In a statement on Tuesday Eni said the partial closure of the plant, which will affect 500 of its workers, will last 12 months. "The picture... continues to be worrying in the light of the particularly sharp contraction in demand for oil products and refining overcapacity which have led to a collapse in margins," Eni said.

Europe's refining sector has suffered due to rapid expansion of complex refineries in China and India which have fuelled competition, while ever higher oil prices and slack demand in Europe has dented profit margins. High-profile victims include Petroplus, Europe's largest independent refiner by capacity, which shut three of its least complex plants after filing for insolvency.

Italian energy company and refiner ERG has downsized its presence in a weak refining sector to shift its focus to power and renewable energy generation. Eni Chief Executive Paolo Scaroni said in March the group can reduce capacity at its loss-making refining division by temporarily halting operations if markets remain depressed, but added it would not close refineries until 2014. Closure at Gela will affect the less profitable production cycles at the plant including the refining of foreign crudes and residues while the refining of national crudes will continue, Eni said.

By Reuters