UK refineries under new ownership
London – Asian-based companies are snapping up refining operations in the UK and other western countries, but what does this new ownership mean for the long-term future of these facilities and the engineering skills bases they support?
In the UK, Shell has accepted an offer from Essar Energy to buy its 272,000 barrels-per-day (bpd) Stanlow refinery and associated local marketing businesses in the UK for around £800 million.
The sale, which is expected to close by mid-2011, is in line with Shell’s strategy to focus its global manufacturing portfolio on what it terms larger and more “sophisticated” assets.
Meanwhile, PetroChina is paying £614 million for a 50% share of INEOS Group’s European refining business, which includes the refineries at Grangemouth in Scotland and Lavera in France.
According to INEOS, the deal will improve the long-term sustainability of the INEOS refineries, enhance security of supply for customers and secure jobs and skills in both the UK and France.
“This new partnership will secure investment and the long-term sustainability of both sites in a highly competitive market and ensure we continue to be Europe’s leading independent crude oil refiner,” said Calum MacLean, chief executive officer of INEOS Refining.
However, the big attraction for both Essar and PetroChina is that they are getting these facilities on the cheap: refining margins are approaching record lows due to overcapacity in the global industry.
And with India, China and other emerging economies expanding domestic capacity, global refining margins are likely to remain under pressure for many years to come.
China, for example, is increasing its capacity by 20% to 12 million bpd, by 2015, as it moves to become self-sufficient in refining, notes The Economist. Another factor, its report notes, is a capacity drive by Middle East producers seeking to add value to their crude oil resources.
For the Shell and INEOS operations, so, it seems the best bet will be to find new efficiencies and become ever leaner. If push comes to shove, this might at least make their new owners less keen to close them than ageing facilities elsewhere.