By KONSTANTIN ROZHNOV
LONDON -- The permanent closure of Petroplus Coryton refinery in England has become more likely after the plant's administrator said Monday it has been unable to sell or refinance it, but the UK government said any closure was unlikely to result in fuel shortages.
"It hasn't yet been possible to find a solution which sees the refinery continue as a going concern," PricewaterhouseCoopers, the administrator of Petroplus UK subsidiaries, said in a statement, as the challenge of raising $1 billion of funding for the refinery "ultimately proved prohibitive in the face of an over supplied European refinery market for both buyers and investors."
The refinery will be idled in a matter of days, but preparations haven't started yet and the plant is still operating at "pretty standard rates," said Steven Pearson, a joint administrator and partner at PwC.
Before Petroplus lost access to all its credit lines and then filed for insolvency in January, Coryton was supplying around 10% of the UKs fuel market.
Thanks to a tolling deal, the 220,000 bpd facility has been the only one of Petroplus's five refineries that continued operating, but that deal expired in the middle of May.
There has been interest "from the start" in turning the Coryton refinery into a terminal, but it wasn't a priority for the administrator to sell the plant as a terminal, PwC's Pearson said.
The facility is likely to be sold as terminal due to its good location, said Roy Jordan, downstream consultant at Facts Global Energy.
"There are likely to be a substantial number of redundancies from within the 500 strong workforce over the next few months if operations are wound down," PwC said.
Up to 500 contractors also dependent on refining at Coryton, according to Richard Howitt, the Member of the European Parliament for the East of England.
The UK Department of Energy and Climate Change said Monday that the government had received a request from the Coryton administrator to provide financial support, but decided that keeping the facility open with public money isn't the best solution for a long-term sustainable future for the plant.
"The difficulties faced by the administrator reflect overcapacity in the European refining sector, indeed a number of refineries have closed across Europe in recent years," a DECC representative said. "With such overcapacity, it would simply not be sustainable to prop up the refinery with taxpayers' money."
The government also said that the latest Coryton developments won't affect fuel supply in the UK.
"There shouldn't be any shortages as there's so much spare capacity and plenty of oil products," Jordan said.
Any closure process of the Coryton refinery will likely take up to three months, during which time discussions regarding a possible sale will continue, PwC said.
Dow Jones Newswires