Fuel crisis in Britain

The £100 fill-up looms for motorists as one of the UK's biggest refineries goes bankrupt

  • Petroplus, owner of Coryton refinery in Essex, files for bankruptcy

• Diesel prices set to rise by 3p a litre

• Threat to a 1,000 jobs

• Profiteers and speculators set to cash in on the disruption

• MEP warns the disruption could affect the Olympics

Daily Mail,

25 january, 2012

Motorists are facing the threat of fuel shortages and £100 fill-ups after one of Britain’s biggest refineries went bust yesterday.

As well as posing a serious risk to forecourt supplies, retailers say it could see petrol prices soaring to record highs as speculators and profiteers capitalise on the disruption.

Diesel prices in particular are set to rise by up to 3p to a record £1.45 a litre, they warn. That would mean more than £100 to fill up a typical family saloon with a 70-litre tank.

MPs and unions joined the chorus warning of shortages while forecourt bosses said there was a risk of parts of the South East ‘grinding to a halt’ after supplies from the giant Coryton refinery in Essex were suspended.

No petrol, diesel or other products, including bitumen for road building, were leaving the site yesterday.

The action came when the refinery’s owner ran out of cash and was unable to extend its credit facilities. Administrator PricewaterhouseCoopers said it had no idea when supplies would resume but was ‘talking to customers’.

Coryton supplies around 10 per cent of the UK’s petrol and diesel, and 20 per cent of the total in the South East. The warnings came as Coryton’s Swiss-parent company Petroplus filed for bankruptcy with the threat to up to 1,000 UK jobs at the former BP-owned refinery.

A separate strike by more than 80 tanker drivers at the South Killingholme refinery in Lincolnshire, which supplies around 340 Jet filling stations, is exacerbating supply concerns.

But energy ministers and oil industry bosses said they were doing their best to make up the shortfall from the UK’s seven remaining refineries and by buying in from abroad. A sudden rush to the pumps, however, could trigger filling stations running dry.

PwC said refining was continuing at Coryton but supplies were being stored rather than being sent out. It could not say when normal service would resume.

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

The Government insisted it was doing all it could to find a buyer.

Profiteers and speculators in the energy markets are already poised to capitalise on the problems to push up wholesale prices which will mean hefty increases at the pumps, say petrol retailers.

Even before the latest crisis, the AA had warned that motorists were on course for a 2p a litre fuel price hike at the pumps – adding £1.40 to the fill-up for a Ford Mondeo.

The Coryton crisis could see that rise even higher, say retailers.

Record pump prices set on May 9, 2011 were 137.43p a litre for petrol and 143.04p for diesel – or just over £100 to fill up a new Ford Mondeo with a 70-litre tank. If diesel hits £1.45 a litre it will cost  £101.50 per fill-up.

Yesterday diesel averaged 142.21p a litre in the UK – less than 1p off the record – and means it currently costs £99.50 to fill up a Mondeo.

Petrol, at 133.89p yesterday, is 3.54p a litre off the May record.

Forecourts fear a repeat of the crisis which caused chaos in Scotland in 2008 when the giant Grangemouth refinery was hit by strike action – leading to pumps running dry, ‘sold out’ signs, and some cases of petrol rationing north of the border.

RAC Motoring Strategist Adrian Tink said: ‘The message for motorists in the area is a simple one – don’t panic buy and potentially  create a problem.’

East of England Euro MEP Richard Howitt said: ‘I don’t want to be alarmist about this, but I don’t want to be dishonest either. Supplies across London and the South East could be affected and I have been told this could impact the Olympics.’

Coryton has refining capacity for ten million tonnes of crude oil per year. Some 36 per cent of its output is petrol and 27 per cent diesel, the rest a mixture of other fuels.

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. Petroplus previously owned a refinery in Teesside, which closed in 2009.

Adding to supply woes is a strike by tanker drivers at the South Killingholme refinery which supplies around 340 Jet filling stations, of which the majority are in the North  and Midlands. Instability in Iran and its threat to block key oil tanker routes in the Straits of Hormuz, coupled with the strong dollar, is also storing up trouble, retailers warned. The UK has 8,500 filling stations of which 2,132 are in the South East. Of these, about 600 are BP and Texaco sites supplied from Coryton.

Petroplus reported a net loss of £265million in the first nine months of last year, while in December its banks withdrew a £675million portion of its £1.29billion credit facility.

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

A Department of Energy and Climate Change spokesman said it was helping to look for buyers but that the ‘immediate priority’ was to keep the Coryton refinery and Teesside storage business operating’. He added: ‘In the short term, companies have made alternative arrangements to ensure adequate supplies of products are available in the South East.’

Petroplus had been increasingly relying on its British offshoot for funds. At the end of 2009, it owed the British arm £42million.

But by the end of 2010 the Swiss company’s borrowings from its British subsidiary had ballooned to £114million. The company’s fate was sealed when 13 banks, including Morgan Stanley, Deutsche Bank and BNP Paribas, froze a $1billion loan that was keeping it going.

Global accountancy giant PwC has been appointed administrator for the British companies.