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More refineries will follow Coryton into administration, says Essar Oil UK chief

Category : Business

Too many UK sites are focused on producing petrol instead of higher margin diesel and jet fuel, warns Volker Schultz

The owner of Britain’s second largest oil refinery has warned that more sites will follow the Coryton plant into administration, as the head of the Unite trade union added to criticism of the government’s refusal to bail out the Essex facility.

Volker Schultz, the chief executive of Indian-owned Essar Oil UK, which owns the Stanlow refinery in Merseyside, warned of more closures because too many sites are focused on producing petrol instead of higher margin diesel and jet fuel. Coryton is cutting 180 staff – out of a total of 850 on the site – as its administrators start to wind down the refinery, which converts crude oil into sophisticated fuel products such as gasoline.

“I think there will be some more closures. We will have strong refineries that will still be able to make ends meet but the weakest will slowly exit and the difficult financial market will accelerate that, as we have seen with [Coryton owner] Petroplus,” said Schultz.

Milford Haven in Wales is also the subject of speculation that it will close, as Schultz predicted a wave of shutdowns in western Europe and the eastern seaboard of the US. Stanlow, which has lost money over the past eight months, is undergoing a multimillion-pound investment drive to ensure that it makes money at all times of the financial year, no matter the state of the jet fuel or diesel market.

Referring to Stanlow’s recent loss-making performance, Schultz said: “We want to get to the position over the next three years where that will not be the case, no matter what.” Stanlow produces 220,000 barrels of refined product per day.

Meanwhile, the general secretary of the Unite trade union, which represents hundreds of Coryton staff, said the government had left Coryton in dire straits by declining to pump state aid into the south Essex site – which needs a multimillion pound overhaul as well as a buyer. Speaking at Unite’s policy conference in Brighton, Len McCluskey said: “Despite all the rhetoric about supporting British industry we have hit a brick wall.”

He added: “We have a refinery under threat of closure in Coryton and that’s a symptom of a wider problem in the [oil] sector, the fact that the free market has been allowed to operate without any restriction.”

At the weekend the Labour leader, Ed Miliband, criticised the government for refusing to offer state aid to Coryton in order to tide over the plant while administrators seek a buyer. Describing the decision as “completely wrong”, he said: “I think they are showing an absolute abdication of their responsibility to the workers at Coryton.” The Department of Energy and Climate Change indicated this month that Coryton has no long-term prospects, saying that state aid “would not be a long-term solution either for the taxpayer or the industry”.

Schultz spoke as Essar Energy, controlled by the Indian-owned Essar conglomerate, announced a pre-tax loss of $1.1bn for the 15 months to 31 March following the loss of a tax case in India’s supreme court relating to the payment of sales tax on a power plant in Gujarat. Essar Energy, which is listed in London, was the biggest faller on the FTSE 250, slipping 8%.