Last checked at 
* Europe has 2 million bpd excess oil refining capacity
* Refining margins low or negative across the region
* Plants must close, oil industry analysts argue
* Shell, BP, Eni results next week
By Christopher Johnson
LONDON, July 23 (Reuters) - Europe is coming underincreasing pressure to close oil refineries as chronicover-capacity hits processing margins, dragging down groupprofits and hitting share prices.
Poland's PKN Orlen and Czech processor Unipetrol both announced unexpected large losses on Wednesdayafter impairment charges at processing plants.
Larger oil peers Royal Dutch Shell, BP andEni will report next week and refining is expected toweight heavily on the results.
Intense competition from other regions with lower costs,faltering domestic demand and plants that produce the wrong typeof fuel mean many refineries are surplus to requirements, andindustry analysts see little chance of a turnaround.
"Investor sentiment on the industry is about as negative asit's ever been," said Bertrand Hodee, research analyst atconsultancy Raymond James & Associates in Paris, saying Europe'srefining sector is at risk of becoming a "ghost town".
Despite the closure of 13 European refineries over the lastfive years with the loss of 1.8 million barrels per day (bpd),or about 12 percent of capacity, Europe still has far too muchprocessing equipment, undermining margins at even the mostsophisticated plants.
Refinery closures have barely kept up with declining demandas Europe's consumers use more energy-efficient cars and switchto other fuels, and as cheap products such as diesel andgasoline flood in from Russia, the Middle East and the Americas.
Data from France's Total SA shows average refiningmargins are running at less than half the levels seen in thefirst half of last year, despite a small improvement in thesecond quarter.
"GRIM REAPER"
"Europe faces excess capacity of around 2 million bpd at atime when the global refining system is also in over-capacity,"Hodee said. "So, are more closures coming? Yes, but don't holdyour breath."
European refinery closures and the consequent job losses forskilled and unskilled workers, are always constrained by political pressure, with strong labour unions at many plants.
Italy's unions are threatening to call a general strike atEni's refineries in a bid to prevent their conversion anddownsizing and say they are prepared to shut off a strategicpipeline feeding gas from Libya.
Analysts are coy on which European refineries are likely tobe shut down or mothballed, citing client confidentiality, butthey say almost all the region's plants are vulnerable in one oranother.
Murphy Oil has been trying to sell its Britishrefining and downstream assets for over two years, whilePhillips 66 has also put its Whitegate refinery inIreland on the block.
Many other European plants are reported to be for sale.
Stephen George, principal consultant at KBC AdvancedTechnologies and a specialist in global refining economics, saysmany European refiners will have to close eventually, no matterhow strong the political pressure to save jobs.
"I don't like to play the grim reaper," George told Reuters'Global Oil Forum, "But when you consider the market, there arechallenges both to scale and product/market alignment."
"Some sites will certainly close." (Additional reporting by Adrian Krajewski in Warsaw, JanLopatka in Prague, Michel Rose in Paris and Ron Bousso inLondon, editing by William Hardy)
