CORRAL PETROLEUM HOLDINGS AB (PUBL) - Preem

should the global economy relapse into recession or should a new global and long-lasting economic recession occur, ourbusiness, strategy, and future prospects could be negatively affected with consequent further negative impacts on ourbusiness, cash flow and financial position.Our business is very competitive and increased competition could adversely affect our financial condition and resultsof operations.We operate in a highly competitive industry and actions of our competitors could reduce our market share orprofitability. Competition is based on the ability to obtain and process crude oil and other feedstocks at the lowest cost,refinery efficiency, refinery product mix and product distribution. We are not engaged in the petroleum exploration andproduction business and therefore do not produce any of our crude oil feedstocks. Competitors that have their ownproduction are at times able to offset losses from refining operations with profits from production operations, and may bebetter positioned to withstand periods of depressed refining margins or feedstock shortages. In order to remaincompetitive, we must continue to upgrade our facilities, and we must monitor shifts in product demand. Our supply andrefining segment competes principally with, among others, AB Svenska Shell and AB Svenska Statoil, as well as withNeste Oil Corporation, who also have facilities to process larger volumes of lower-priced, high-sulphur heavy Russiancrude. Our marketing segment, which includes the station and consumer division through which we sell gasoline andother refined products to retail customers, competes primarily with AB Svenska Statoil, OK-Q8 AB, AB Svenska Shell,and ST1 AB. In addition, we compete with other industries that provide alternative means to satisfy the energy and fuelrequirements of our industrial, commercial and individual consumers. Inability to compete effectively with thesecompetitors or increased competition in the oil refining industry could result in a decrease in our market share ornegatively impact on our refining margins, either of which could adversely affect our financial condition and results ofoperations.We are faced with operational hazards as well as potential interruptions that could have a material adverse effect onour financial condition and results of operations.Our operations are subject to all of the risks normally associated with oil refining, storage, transportation anddistribution, including fire, mechanical failure and equipment shutdowns and other unforeseen events. In any of thesesituations, undamaged refinery processing units may be dependent on or interact with damaged sections of our refineriesand, accordingly, are also subject to being shut down. In addition, damage to the pipelines transporting products to andfrom each of our refineries’ processing facilities could cause an interruption in production at those facilities. Any ofthese risks could result in damage to or loss of property, suspension of operations, injury or death to personnel or thirdparties, or damage or harm to the environment. We depend on the cash flows from production from Preemraff Lysekiland Preemraff Gothenburg. Therefore, a prolonged interruption in production at either refinery would have a materialadverse impact on our business, financial condition, results of operations and cash flow. As protection against thesehazards, we maintain property, casualty, and business interruption insurance in accordance with industry standards.Although there can be no assurance that the amount of insurance carried by us is sufficient to protect us fully in allevents, all such insurance is carried at levels of coverage and deductibles that we consider financially prudent. However,a major loss for which we are underinsured or uninsured could have a material adverse affect on our business, financialcondition, results of operations and cash flows.In the future, we may not be able to maintain or obtain insurance of the type and amount we desire at reasonablerates. As a result of factors affecting the insurance market, insurance premiums with respect to renewed insurancepolicies may increase significantly compared to what we are currently paying. In addition, the level of coverageprovided by renewed policies may decrease, while deductibles and/or waiting periods may increase, compared to ourexisting insurance policies.We are subject to governmental laws and regulations, including environmental laws, occupational health and safetylaws, competition laws, energy laws and tax laws in Sweden and elsewhere, which may impact our business andresults of operations.We are subject to various supranational, national, regional and local environmental laws and regulations relatingto emissions standards for, and the safe storage and transportation of, our products. We are also subject to EU andSwedish environmental regulations concerning refined products. Sweden has among the strictest environmentalspecifications in the EU. We are subject to strict EU environmental regulations. These regulations restrict the sulphurcontent of both gasoline and diesel and the aromatic content of gasoline and impose a CO2 emissions trading program.For the trading period of 2008 to 2012, we have obtained emission allowances of 2,467,000 tons of carbon dioxide peryear, which we believe is sufficient to cover our emissions. However, there is uncertainty with regard to the allocation ofemission allowances during the trading period from 2013 to 2020. Manufacture of refined petroleum products has beenincluded in the European Union list of sectors that are at risk of “carbon leakage.” The issue of carbon leakage relates tothe risk that companies in sectors subject to strong international competition might relocate from the European Union tothird countries with less stringent constraints on greenhouse gas emissions. Without that definition there would not havebeen possibility for free emission credits during the post-Kyoto period (2013–2020). The actual number of freeallowances that industrial installations will receive will be decided in 2011. This will be done on the basis of commonperformance benchmarks which should be determined by the end of 2010. Beginning in 2013, we may be required to4