CORRECTED-UK insolvency law seals fate of Coryton refinery
(Corrects paragraph 18 to state that Gunvor, not Vitol, bought the Ingolstadt refinery)
* Lack of government aid snuffed out chances of purchase
* Strategic reasons for trading houses buying weaker assets
* A $150 million September turnaround also put off buyers
By Simon Falush
LONDON, June 27 (Reuters) - When Petroplus went bankrupt early this year, many in the industry thought that at least the Coryton oil refinery in England, the most modern and efficient of its five plants in western Europe, would survive.
So far it is the only one to have closed, doomed by the priorities of UK bankruptcy law, the British government's laissez faire approach and strategic calculations by trading houses who saw more opportunities from other refinery assets.
Workers at the plant in Essex, near London, were furious after the administrator PwC confirmed it would be turned into a storage depot in a deal between Royal Dutch Shell, Vopak and Greenergy, meaning the loss of most of around 900 jobs at the site.
A bid from a former Russian energy minister was dismissed by the administrator as not credible.
"We all understand that if there's overproduction in Europe, refineries have to close, but why does it have to be the British one?" said Glenn Relfe, a process operator at the plant.
Those with less of a personal stake in the highly rated plant are also surprised at its closure.
A $150 million pound refit due in September made the plant look less attractive for investors, and increased the need for at least short-term government support to ensure a deal.
But even factoring this in, with a Nelson complexity rating of 12 - meaning it can produce a high proportion of lighter fuels that fetch a higher margin - Coryton was seen as stronger than numerous plants owned by Petroplus and other companies.
"There are 20 better candidates to close, it is a decent size, decent complexity, decent location, none of it perfect, but OK," a trader who buys and sells crude oil and oil products said.
It was UK bankruptcy law's emphasis on the interests of creditors, more than any other reason, that saw Coryton close, according to Coryton's joint administrator Steven Pearson of PricewaterhouseCoopers.
"The UK is the most un-influenced market in Europe, where economic logic drives decision making, not politics, so they are not influenced by politicians, unions, or other non-quantifiable factors," he said.
"Statute in this country maximises the overall dividend that creditors receive, in France it is to minimise the impact on employment."
Petit Couronne in France, a much less efficient and modern Petroplus plant, got a pre-election reprieve in February when the country's president at the time, Nicolas Sarkozy, cooperating with Shell, stepped in to provide a multi-million euro support package for the ailing plant.
The British government's line, by contrast, has been that overcapacity in Europe and the UK makes any such state support wasteful and inefficient.
There has been no clear evidence of state support for the other Petroplus refineries, Ingolstadt in Germany, Cressier in Switzerland, and Antwerp in Belgium, though some analysts and traders suspect that there may have been some support behind the scenes at a local or central government level.
These refineries have benefited from the strategic aims of major trading houses Gunvor and Vitol, which have access to Russian crude oil and want more control over how it is brought to market by owning well-placed refineries and storage facilities.
Coryton, which was more focused on supplying a well-fed domestic market, did not benefit from the location of Antwerp, bought by Gunvor, which is in a key trading hub where oil products are priced.
Traders said that the relatively complex German plant Ingolstadt, bought by Gunvor but not currently operational, processes Kazakh Caspian blend grades that are sold by state-controlled Russian oil firm Rosneft.
German bankruptcy law, by contrast with Britain's, played a part in helping keep the Ingolstadt plant alive, Pearson at PwC said, as it requires the government to pay out three months wages for companies that go bankrupt.
"That of course is an enormous subsidy, and if you look at the strategy, they stopped refining, and there still hasn't been a drop refined."
PwC's Pearson said that another feature of Britain's law was that it gave him, as an insolvency practitioner, a strong personal incentive to close the plant rather than keep it open.
Pearson said he had taken on great personal risks, due to personal liability rules that do not exist in continental Europe.
"I took risks on this that have never been taken by insolvency practioners to keep this plant running. The most prudent thing to have done would have been to close it on the first day, and lay everyone off."
Added to this, all the oil at the site was owned by the Petroplus group, rather than the subsidiary company that owned Coryton, so that there were very few working assets that could be used to sweeten a deal, Pearson said.
However, for workers facing unemployment the fact remains that a plant which was seen as a cash cow for the group is now the only one to be closing. Some feel that Britain is making a sacrifice that will benefit competing refineries on the continent.
"It seems like the government is underwriting jobs and prosperity in mainland Europe at our expense," Coryton process operator Relfe, who will soon be made redundant, said.
Cressier in Switzerland, in which Vitol now has a stake, is seen as more strategically important for the land-locked mountainous nation, than Coryton is for the UK which has plentiful ports as well as ample refining capacity.
In the United States, refineries which were on the critical list have been rescued too, making the closure of Coryton even harder for those working there to take.
For example, in April, Delta Airlines became the first U.S. airline to buy a refinery to control the cost of jet fuel. (Editing by Anthony Barker and Sandra Maler)
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