The operators of the UK’s second-largest fuel refinery insist its recovery is on track for the end of the year despite being hit by refining losses in the last three months.
Refining costs at the Stanlow plant in Cheshire exceeded profit margins during the three months to the end of June because of high gasoline stocks and weaker diesel prices.
An excess of petrol but a shortage of diesel in the UK and Europe, as more consumers switch to driving diesel cars, impacted on Stanlow’s margins in the April to June quarter.
Essar Energy bought Stanlow from oil giant Shell about two years ago, and has been slashing costs and overhauling the site to boost profitability.
Gross refining margins at the plant slipped to $4.86 a barrel during the first quarter from $7.53 a year earlier. The refinery typically needs to earn a gross margin of around $6 per barrel to break even.
Essar has set a new target of Stanlow achieving an average $6 per barrel gross margin by the end of March 2015 – compared with around $2 when it bought the plant – to insulate it from “continuing volatility in industry-wide European refining margins”.
Much of Stanlow’s oil is supplied by Shell, but North Sea crude oils now comprise less than a quarter of its raw product, compared with more than 90% in 2011. It sources cheaper fuel from around the globe including Russia, North Africa and offshore Canada.
Stanlow has also switched to using cheaper natural gas in its burners rather than fuel oil.
The plant produced 19.3 million barrels during the first quarter, down on 19.7 million a year earlier.
Stanlow, which has capacity for 75 million barrels per year, earned pre-tax profits of $202.3million (£129 million) in the year to the end of March, compared with losses the prior year.
Essar said it is on target for a multimillion-pound upgrade to Stanlow, including extending the life of Europe’s largest catalytic cracking unit by 25 years.
Recommended for you
