French refinery losses may reach 500 million euros ($689 million) this year as demand falls and profit margins are eroded by US imports, according to the country’s oil lobby.

“The situation is very difficult,” said Jean-Louis Schilansky, head of the Paris-based Union Francaise des Industries Petrolieres, which represents companies including ExxonMobil and Total, the country’s biggest refiner.

Workers at all five of Total’s French refineries have participated in a strike in recent days, demanding the explorer use profit from other parts of the business to pay bigger salary increases. The company has shut plants and plans further reductions in its European refining operations.

Refiners are mothballing plants across Europe where overcapacity remains as high as 10 percent, according to UFIP. Over the past four years LyondellBasell, Petroplus and Total have stopped refining at their plants at Berre, Petit-Couronne, Reichstett and Dunkirk.

France now has eight working plants compared with 24 in 1977, with Exxon operating two, Ineos Group one and Total the rest.

European margins dipped to 13 euros a metric ton this month after rising as high as 32 euros a ton in February to give an average of 18 euros a ton for the year, according to data on UFIP’s website. This compares with averages of 34 euros a ton last year and 14 in 2011.

Cheap gas

French refiners lost about 1 billion euros a year in the three years between 2009 and 2011 amid an economic slump, UFIP reported. They broke even last year when margins were above the 30 euros-a-ton level the organization considers is needed by refiners to break even.

The region’s refiners are struggling to compete with plants in the US, run using relatively cheap natural gas, Schilansky said. A shale gas boom in the US has pushed gas prices lower.

Total has set a target to reduce its European refining and petrochemicals business by 20% from last year to 2017. As the biggest refiner in western Europe, where it operates eight plants, the company has borne the brunt of lower margins and a drop in the consumption of fuel products.

Total reported third-quarter profit, excluding changes in inventories, fell to 2.72 billion euros from 3.36 billion euros a year earlier, the Courbevoie, France-based company said in October.

“Total management has no intention to allow workers to benefit from its excellent results which will make shareholders a lot richer this year,” the CGT union said in a statement two days ago. The results would allow bigger pay rises than the 1.2% to 1.5% increase offered by management, it said.