UPDATE 2-Petroplus UK refinery likely to close-PwC
* About 900 jobs at risk
* Local politician, union blame UK government (Adds details)
By Ikuko Kurahone and Simon Falush
LONDON, May 28 (Reuters) - Insolvent Swiss refiner Petroplus' Coryton refinery in the UK is likely to close after its administrator PricewaterhouseCoopers (PwC) said on Monday it had failed to find a buyer that could pay $1 billion for the site.
Petroplus, once Europe's largest independent refiner, filed for insolvency in December after it could not meet its debt obligations.
PwC said in a statement "a substantial number of redundancies" were likely in the next few months if operations were wound down and any closure process was likely to take up to three months.
The administrator told Reuters Coryton had enough crude oil to process and keep the site running for the week of June 4. Monday June 4 and Tuesday June 5 are public holidays in the UK.
The UK government, which faced criticism over Coryton, moved to reassure the public that the likely closure would not lead to fuel shortages.
"We want to reassure people that there will not be any impact on fuel supply from this development," a Department of Energy and Climate Change spokesman said.
The Coryton refinery has a capacity to process about 175,000 barrels of crude oil per day and additional 65,000 barrels per day of feedstock. It employs about 900 people including contractors.
PwC said in an emailed statement it could not find "a solution which sees the refinery continue as a going concern".
"The current economic environment, the challenge of raising $1 billion (£625 million) of funding for the refinery, including the $150 million capital expenditure 'turnaround' project ultimately proved prohibitive in the face of an over supplied European refinery market for both buyers and investors."
All the work connected with the refinery turnaround programme in September has been suspended, the administrator said.
The UK government faced criticism over its lack of action to save jobs amid recession while France has stepped in to keep a Petroplus refinery running.
The local member of the European parliament (MEP) and the unions blamed the UK government for putting roughly 900 jobs in Coryton, including contractors, at risk.
"It's a bitter blow for the workforce ... I think the process was flawed and that the government should have stepped in," MEP Richard Howitt said.
Coryton is more complex and profitable than other Petroplus refineries and most analysts expected it to survive as a refinery.
However, so far two other refineries - Antwerp and Cressier - have been sold to Gunvor and the joint venture between Vitol and Petroplus founder Marcel van Poecke's AtlasInvest, despite the odds that they would likely turn into oil terminals.
Traders said the proximity to Europe's trading hub attracted bids from these big trading houses.
"The fact that two other of its refineries have been bought and will resume operations makes it more difficult for Coryton to continue as a viable refinery, especially as it will need considerable capital investment to make it competitive," Roy Jordan with consultancy Facts Global Energy said.
"It is, however, well located and could well be used as a storage and distribution facility."
The previous head of Petroplus Tom O'Malley took over the reins from van Poecke in 2006 and pushed for an aggressive merger and acquisition strategy, which made him a refinery legend in the United States.
But refining margins have collapsed from their record high levels hit in 2008 due to the fall in fuel demand in Europe and other industrialised countries, forcing many refineries to shut permanently or be put up for sale.
Refining margins has recovered from since late 2010, when they hit the weakest level since mid-1995 in Europe, but they remain much below the record levels.
The most recent permanent shutdown of a UK refinery was Teesside in 2009, which was also run by Petroplus.
"Closure of the refinery reflects overcapacity in the European refining sector and there have been a number of refineries have closed across Europe in recent years," the DECC spokesman said. (Reporting by Ikuko Kurahone and Simon Falush; editing by Helen Massy-Beresford)
- Tweet this
- Share this
- Digg this