Drivers face chronic fuel shortages and soaring petrol prices as one of the UK's biggest refineries goes bankrupt
Posted / Last update: 25-01-2012
Petroplus and the refinery situation . . .
There only eight refineries in the UK - at Fawley near Southampton, Grangemouth, Stanlow, Milford Haven, Lindsey in north Lincolnshire, South Killingholme and Pembroke, as well as Coryton. They may now be called upon to help make up the shortfall following the 586-acre Essex site's closure.
Zurich-based Petroplus has reportedly been struggling with bankruptcy since last year with oil prices spiralling and credit hard to come by. It previously owned a refinery in Teesside, which closed in 2009.
Petroplus admitted that talks with lenders had broken down and its European refineries - including Coryton, which produces 175,000 barrels of crude oil per day - would close. Petroplus said its primary goal was 'to ensure that operations are safely shut down and to preserve value for all stakeholders.'
CEO Jean-Paul Vettier said: 'It is unfortunate to have reached the point where the Executive Committee and Board of Directors have to inform our employees, shareholders, bondholders and other stakeholders about these circumstances. We have worked hard to avoid this outcome, but were ultimately not able to come to an agreement with our lenders to resolve these issues given the very tight and difficult European credit and refining markets. We are fully aware of the impact that this will have on our workforce, their families and the communities where we have operated our businesses.'
Coryton, which stands close to the M25, was bought by Petroplus from BP for $1.4billion (£714.6m) in June 2007. It began operating in 1953, producing petrol and diesel, new 'cleaner' fuels, aviation fuels, liquefied petroleum gas, fuel oils and bitumen for roadworks.
Mick Ainsley, an official at trade union GMB, said: 'GMB has been dealing with the situation at Coryton since before Christmas when Petroplus told contractors to tighten their belts. Some members have already taken redundancy. Coryton has done well but is the victim of the under-performing European arm. The impact of any further redundancies would be felt locally and in the capital. 'The Government needs to step in to ensure that this refinery is kept in operation.'
The refining market has come under pressure in recent years as operating expenses and the cost of crude oil surge at a greater rate than the value of the products. A survey carried out by energy consultancy Wood Mackenzie in 2010 showed that 29 of 96 refineries in the EU did not generate a positive net cash margin. However, the market has become tougher as the economic downturn in Europe has hit demand for transport fuels and competition has grown from the refineries in Asia.
Petroplus reported a net loss of $413million (£265m) in the first nine months of last year, while in December its banks withdrew a $1.05bn (£675m) portion of its $2.01bn (£1.29bn) credit facility.
The other main supplier for the South East and London is the Exxon Mobil refinery in Fawley, near Southampton.
There is speculation that former owners BP might be asked to step in to help protect a strategic energy supply. BP, a major customer of the Coryton refinery, said it had no immediate supply issues but it was 'watching the situation very closely'.
The refinery was operating as usual but no deliveries of petrol or other products, including bitumen, were leaving the site, according to union officials. Russ Ball, regional officer of Unite, said lorries would be 'stacking up' and were not allowed to leave because of the insolvency arrangements. Crude oil is still being produced and the refinery is operating, but nothing is going out of the gate,' he said. 'I am still confident because the refinery is viable and productive and hopefully we will know more in the next 24 hours.' Petrol deliveries to garages and supplies of bitumen for road building and repairs will be affected 'pretty soon', he said.
Professional services firm PwC confirmed it was appointed as administrator to the UK arm of Petroplus, which includes the Coryton refinery, an oil storage site in Teesside and a research and development site in Swansea. PwC said Petroplus had suffered as a result of 'low refining margins and high restructuring costs'.
Steven Pearson, joint administrator and PwC partner, said: 'Our immediate priority is to continue to operate the Coryton refinery and the Teesside storage business without disruption while the financial position is clarified and restructuring options are explored. Over coming days we intend to commence discussions with a number of parties including customers, employees, the creditors and the Government to secure the future of the Coryton and Teesside sites.' The administrator said no redundancies had been made at this stage.
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