Share sales in new Saudi Arabian export refineries will offer investors alternatives to listed downstream companies in developed countries which are likely to remain exposed to chronically weak margins and high operation costs, say analysts.

The kingdom plans initial public offers (IPOs) for two plants in coming years, following the listing of PetroRabigh in early 2008.

These, along with export refineries in India, are likely to attract investors' money away from refinery stocks in the industrialised countries.

They may also make it even more difficult to find buyers of relatively old downstream assets, most of which are up for sale in Europe, analysts said.

'There is a transfer of the industry from Europe and the United States to the Middle East and India,' Christophe Barret, Gredit Agricole's global oil analyst, said.

'So investment is going to the Middle East and India too.'

Not all oil equities follow headline crude oil prices. Shares of independent refiners in Europe, such as Swiss based Petroplus, Italian Saras and Finnish Neste, have been tracking refining margins, rather than outright benchmark crude futures.

The opposite has been true of majors such as BP and Royal Dutch Shell, which have been divesting some  refining assets.

'If you look at share prices of European independent refiners, the curves are basically correlated to refining margins, which are now much lower than record highs several years ago,' said Richard Griffith, oil sector analyst with Evolution Securities.

'In downstream, refining returns on capital have rarely been much better than the cost of capital.'

Reuters' model showed complex refining margins in  Rotterdam were $7.84 a barrel in December 2008, when North Sea benchmark Brent crude futures hit multi-year lows around $36 a barrel.

Since then, Rotterdam margins have fallen to around $3, while Brent crude has more than doubled to around $81 this week.

JP Morgan has said northwest Europe complex margins would remain roughly between $2 and $4 at least until early next year.

PetroRabigh's curve is closer to crude and prices have more than doubled this week from lows in December 2008.

Evolution Securities' Griffith said new refineries in the Middle East were more competative as they would be larger and technically more sophisticated than ones in Europe. They were also export oriented and able to tap into high growth emerging markets in Asia, as well as Europe.

Some portfolio diversification offers that will not be exposed to weak refining margins may come from UK oil wholesaler Greenergy, which plans an IPO in about one year. Commodities and oil trader Glencore has also been seen as inching towards public life.

European refineries have already felt competition from imported fuels from the Middle East and India, which now has  the world's largest single refining facility at Jamnagar.

Some European plants have been closed, either permanently or for the long term, such as Petroplus' UK Teesside site. Many US and Japanese refiners have also been forced to shut some capacity.

Energy consultancy Purvin & Gertz said European refiners will be forced to shut more capacity, currently totalling about 16 million barrels per day, and more fuel will be imported.

'Over 1 million bpd of less competitive refining capacity will close, or re-configure, in Europe to bring refining margins back to more profitable levels,' it said in a note.

Many of the refining assets currently up for sale have been seen as prone to closure except for a few, such as Ineos' Grangemouth refinery in Scotland, which may be sold to PetroChina.-Reuters