1,000 jobs at risk as key UK oil refinery 'closes'

A view of part of the Petroplus Refinery in Coryton, near Basildon, Essex (PA)

The Government gave an assurance it was doing all it could to find a buyer for one of the country's biggest oil refineries today after it fell into administration, prompting fears of job losses and fuel shortages.

Coryton refinery in Essex, which supplies 20% of fuel in London and the South East, has halted sales and told its staff it was unsure when supplies would start again.

The refinery was operating as usual today but no deliveries of petrol or other products, including bitumen, were leaving the site.

Petrol deliveries to garages and supplies of bitumen for road building and repairs will be affected "pretty soon", unions believe.

The AA said recent disruption at refineries had been short-lived, adding that its main worry was the possible effect on fuel prices.

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

Linda McCulloch, national officer at the Unite union, said: "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.

A Department of Energy and Climate Change spokesman said: "The refinery remains operational. We understand that a process is under way to put in place the necessary commercial arrangements to deliver product into the market.

"Companies have already made alternative arrangements to ensure adequate supply of products are available while these commercial arrangements are being put in place."

Unite said energy minister Charles Hendry assured the union that the Government was "exploring all avenues" to find a buyer for the business.

Professional services firm PwC confirmed it was appointed yesterday as administrator to the UK arm of Petroplus, which includes the Coryton refinery, an oil storage site in Teesside and a research and development site in Swansea.

PwC said Petroplus had suffered as a result of "low refining margins and high restructuring costs".

Steven Pearson, joint administrator and PwC partner, said: "Our immediate priority is to continue to operate the Coryton refinery and the Teesside storage business without disruption while the financial position is clarified and restructuring options are explored.

"Over coming days we intend to commence discussions with a number of parties including customers, employees, the creditors and the Government to secure the future of the Coryton and Teesside sites."

The administrator said no redundancies had been made at this stage.

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 413 million US dollars (£265 million) in the first nine months of last year, while in December its banks withdrew a 1.05 billion US dollar (£675 million) portion of its 2.01 billion US dollar (£1.29 billion) credit facility.

The other main supplier for the South East and London is the Exxon Mobil refinery in Fawley, near Southampton.

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

Meanwhile tanker drivers employed by road haulage firm Wincanton started a seven-day strike in a dispute over pay and conditions, which union officials said will disrupt fuel supplies to hundreds of Jet garages.

Unite said around 100 of its members were involved in the row, claiming they were facing pay and pension cuts.

The drivers, who operate out of Immingham in Lincolnshire, Kingsbury, near Warwickshire, and Stockton-on-Tees in the North East, held a rally today ahead of the walkout.

Unite national officer Matt Draper said: "The frustration expressed by Wincanton's oil tanker drivers can be seen right across the sector. Drivers are under increasing strain, working in a very unstable industry with pressure to deliver fuel round the clock, but where terms and conditions are being slashed.

"It's time the major players stopped riding rough-shod over the drivers. Only minimum standards can ensure that the dangerous job of delivering fuel is undertaken by highly skilled drivers.

"These drivers criss-cross the country delivering up to 38,000 litres of petrol at any one time. The risks are huge but the thanks they get is an attack on their livelihoods."

Mr Hendry said the appointment of the administrator was a "very important step forward", adding: "They've been able to hit the ground running because they've been familiar with the issues and therefore need to try and get the plant up and running as soon as possible.

"Major customers like BP and Shell are sourcing the fuel which is needed from other refineries. We've got spare import capacity in the country, so if we needed to bring in more fuel from elsewhere we can do so.

"There's no issue of a shortage arising because of this, we see on a regular basis refineries closing down for maintenance and the country keeps on running as if nothing had happened, and so we are quite confident that at the moment the administrator is doing everything that he possibly can in order to take this forward and to secure the jobs for the future.

"Over the last year a number of refineries here have been sold, there's significant international interest in investing in this sector in the United Kingdom, and therefore there is I believe very good prospects for a new buyer to be found for Coryton."

The GMB union said later that contract workers at the refinery had been asked if they wanted to transfer to other sites or take redundancy.

Officials said there was speculation that the refinery will either be sold quickly, or that other refineries will increase production, leaving Coryton's future in doubt.

PA