Essar focuses on efficiency drive as refinery suffers loss

India-focused Essar Energy bought the Stanlow refinery near Ellesmere Port, which accounts for 15 per cent of production from UK refineries and produces around 1.5 billion litres of kerosene a year for aircraft fuel, from oil giant Shell in July.

The operation made an underlying loss of $30.2m – £19.4m – in the first eight months under new ownership as refining margins in Northern Europe were squeezed by overcapacity. But its plans to make efficiency savings and diversify the business into producing more oil-based chemicals and diesel are expected to add two to three US dollars on the margin on a barrel of oil over the next three years.

This would mean that the operation would provide “attractive returns” throughout the market cycle.

The loss at the plant comes after the Coryton refinery in Essex fell into administration, jeopardising nearly 1,000 jobs.

The company said: “In the UK, work is well under way on various projects aimed at increasing margins at our Stanlow refinery following its acquisition at the end of July 2011.

“Stanlow is operating in a tough European refining market, but we continue to see signs that uneconomic refining capacity is being removed from the market which we expect to have a positive impact on margins.”

Stanlow, which supplies Manchester airport with jet fuel, saw supplies disrupted earlier this month, leading to some flights being delayed.

The group’s profits slumped nearly two-thirds to $129m in the 15 months to March 31, compared to the previous year.