Fears for road fuel supplies as refinery put into administration

Drivers who operate out of Immingham held a rally ahead of the walkout.
Drivers who operate out of Immingham held a rally ahead of the walkout.
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Around 1,000 jobs are at risk after one of the UK’s largest oil refineries fell into administration, stoking fears over fuel supplies.

Coryton refinery in Essex – which supplies 20 per cent of fuel in London and the South East – halted sales on Monday and told its staff it was unsure when supplies would start again.

The shutdown at the former BP-owned refinery which has a total capacity of 175,000 barrels of crude oil per day came as Petroplus, its Zurich-based owner, said talks with its lenders had broken down and it had appointed a receiver to the UK refinery.

Yesterday’s announcement also coincided with the launch of a seven-day strike by oil tanker drivers which is expected to hit supplies in the North of England and the Midlands.

More than 100 drivers from haulage firm Wincanton, who deliver to Jet filling stations from depots at Immingham, Kingsbury and Stockton-on-Tees, launched the action in a dispute over terms and conditions, although the firm says they are among the best paid in the country.

Linda McCulloch, national officer at the union, said of the refinery shutdown: “One thousand jobs are at risk but we firmly believe that joint action by the owners and Government can help secure the business.”

There are seven other refineries in the UK – at South Killingholme and Lindsey, both in North Lincolnshire; Fawley, near Southampton; Grangemouth, near Falkirk; Stanlow in Cheshire; and Milford Haven and Pembroke, both in Pembrokeshire.

Petroplus, which saw its credit rating downgraded by Standard & Poor’s earlier this month and suspended shares yesterday, said it would also file for insolvency. It previously owned a refinery in Teesside, which closed in 2009.

The 586-acre Coryton refinery, close to the M25, was bought by Petroplus from BP for $1.4bn (£714.6 million) in June 2007.

The site became operational in 1953 and produces petrol and diesel, including new “cleaner” fuels, aviation fuels, liquefied petroleum gas (LPG), fuel oils and bitumen.

A group of European parliamentarians including East of England MEP Richard Howitt have been meeting to discuss ways to save jobs at Petroplus, which has facilities in France, Germany, Belgium, Switzerland and the UK.

Mr Howitt said the refinery was being dragged down by its parent company. He said half the jobs were well-paid, highly-skilled positions, while the other half were contractors, many of whom have already received their redundancy notices.

He said: “One thousand job losses in Essex will have a devastating impact on the local economy.

“I don’t want to be alarmist about this, but I don’t want to be dishonest either. Supplies across London and the South East could be affected and I have been told this could impact the Olympics.”

Unite said it was in constant dialogue with Petroplus and the UK Government about a potential solution to the developments.

Ms McCulloch said: “It is vital that these negotiations are conducted in an atmosphere of calm to allow the best buyer to be found for the site.”

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 European Union 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 $413m (£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.

BP, a major customer of the Coryton refinery, said it had no immediate supply issues but it was “watching the situation very closely”.