Closure of refinery in Britain

Unlike the steelmakers and the shipbuilders there will be nothing to replace the refineries as industry (and along with it, civilisation) dies

U.K. Refinery is Latest Casualty of Europe's Slump

Like steel-makers and shipbuilders before them, the aging oil refineries that provided Europe's fuels are dying off as demand shifts to suppliers elsewhere, depriving communities of jobs that will be difficult to replace

WSJ,

9 July, 2012

The Coryton oil refinery, perched on the mouth of the Thames River 40 miles east of London, just became the latest casualty. The refinery was one of the largest and most modern in Europe, supplying some 10% of the U.K.'s fuel market and was a primary source of jobs for the local community. This summer it is shutting down, the latest industrial victim of a prolonged European economic slump and competition from the Middle East and Asia—regions with closer access to burgeoning emerging markets.

The site is set to live on in radically changed form as an oil distribution terminal employing no more than 50 permanent staff, a tenth of the current staff of 500. A first batch of 180 dismissal notices was handed out at the end of June, with more to follow.

Waiting for his notice is Scott Davey, a control-room operator who has worked here for 20 years and is now thinking about relocating to Asia, where his expertise is in demand, leaving his wife and two children in England. "There are virtually no jobs for us in the U.K. and almost none in Europe," says 41-year old Mr. Davey.

Coryton is the eighth refinery to close in Europe and the second in the U.K. since the start of the economic crisis in 2008, from around 100 in the region. The downturn and the euro zone's sovereign debt problems have sharply cut the continent's demand for fuel such as diesel and gasoline. Most European refineries were built to maximize gasoline production, but demand for the fuel in Europe has fallen as people drive less and switch to more economical diesel.

The fall in European demand has coincided with the refining boom in Asia and the Middle East and a global shift in demand to diesel, leaving European refiners without access to many export markets. By contrast, there is strong demand for fuel from companies in Asia and the Middle East that have money for upgrades and capacity expansion and can still make a profit when crude prices are high.

More bad news for European refiners has come from the U.S., the world's largest oil consumer. The country's transformation into a net exporter of refined products and declining U.S. gasoline demand have diminished a market where European refiners once shipped much of their surplus gasoline.

That shift has trimmed more than one million barrels a day from European refining capacity, equivalent to 8% of the regional total that was on line in the first quarter this year.

European refiners and analysts believe that at least another one million barrels a day of refining capacity will need to shut down for the remaining refiners to survive.

Problems in the European economy were a key reason for the failure of Swiss-based Petroplus Holdings AG, the Swiss company that owned the Coryton refinery. It filed for insolvency earlier this year after profit margins failed to improve due to lower demand for refined products and lack of credit.

Industry experts at the time said that of Petroplus's five refineries, Coryton was most likely to survive. Three of those refineries have since been sold to commodity trading houses and a private Iranian company is bidding for a fourth one, leaving Coryton the only Petroplus plant to close..

In terms of countries likely to see further closures, "U.K., France, Italy and likely Germany are pretty much vulnerable," says Roy Jordan, downstream consultant at Facts Global Energy.

The slow death of many European oil refineries has added to the lengthening list of industrial employers that are folding in the face of growing competition from overseas, gutting local economies. For workers at Coryton, the chances of finding a new job in the area slim.

"The only real option unfortunately would be to relocate, even to another part of the world," says Russell Jackson, 54-year-old chairman of the Unite labor union's Coryton branch and a process controller who has worked at the plant for 29 years.

The U.K. government said it looked into providing state aid to the refinery, but decided that supporting the plant with public money would be unsustainable given the state of the European refining sector.

"If government did step in to help Coryton, this would be a short-term fix, and it could potentially lead to job losses at other refineries who would be at an unfair disadvantage," Energy Minister Charles Hendry said in June.

Local government authority Thurrock Council estimates the refinery's closure will cost the local and national economies more than £100 million ($155 million) each year, including around £30 million in wages, almost as much in contractor costs and the rest in locally sourced materials, services and supplies.

"It has been very quiet for the past couple of weeks as [Coryton] contractors are gone and locals aren't spending at the moment," says Nuala Keren, licensee and manager of The New Pompadour, a pub that used to be packed with contractors on weekdays.

Belson and Sons Optometrists is one of many shops in the area that has had direct links with the refinery. It supplied safety spectacles for refinery workers and contractors, as well as prescription glasses for them and their families, says manager Karen Wide. Now she says she is worried for her job, as the business could suffer if many customers leave the area because of the Coryton closure. "Corringham could turn into a ghost town; crime will rise," she says.

Most of those losing jobs at Coryton can't afford to take a sharp pay cut: at least 85% of houses are mortgaged in the Corringham area, according to realtor Connollys. Local residents fear that it could cause property prices to plummet.

"The market will most probably be flooded with property, including the rental market," says Cheryl Bemister, letting administrator at Connollys.

Some Coryton workers put their homes up for sale before redundancies were announced, as it may take months to sell them, says 53-year-old Tony Clements, who has worked at the plant for 23 years. Mr. Clements is relatively lucky—he doesn't have a mortgage to repay and is planning to retire and live off the pension he has already earned.

For local businesses, the future is uncertain at best.

Paulette Glover, who owns a bakery, said when asked about her expectations: "Come and see me in a year."