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Fears for future of Stanlow oil refinery amid urgent financing talks

The owner of the vast Stanlow oil refinery in north-west England is in urgent talks about its future amid concern that it could be nearing collapse.

Sky News has learnt that Essar Oil UK, which bought the site at Ellesmere Port from Shell in 2011, has been in discussions for weeks about efforts to stabilise its finances.

Whitehall officials are said to have been alerted to the company’s deteriorating financial position, with crucial meetings said to have been lined up to take place next week.

Details of the company’s troubles were unclear on Friday, but an insolvency of the company behind the Stanlow manufacturing complex could have significant implications for the regional and national economies.

The site produces roughly one-sixth of Britain’s transport fuels – equating to 4.4 billion litres of diesel, 3 billion litres of petrol and 2 billion litres of jet fuel.

It is an important part of the UK’s industrial manufacturing sector, directly employing more than 900 people, with an additional 800 on-site contractors and a further 5000 people employed indirectly through the extended value chain, according to Essar Oil UK’s website.

A source close to Essar Oil UK said the COVID-19 pandemic had depressed margins and impacted demand for its products, along with other refining businesses around the world.

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It was unclear whether a direct request for financial assistance from the government had been made.

Stanlow was now seeing increased demand for road transport fuels, and the company remained committed to a sustainable future and aiding the UK’s decarbonisation agenda, the source said.

The site, which was one of a number offloaded by Shell a decade ago, was promised a £7.5m government grant last year to develop Britain’s first low-carbon hydrogen plant.

Sources said a number of executives and professional advisers had recently resigned from roles with the Essar Oil UK business, which is controlled by the Ruia family.

Stanlow has been beset by problems in recent times, with an unplanned shutdown in 2019 triggering a significant oil spill.

Essar Oil UK said it had historically been “a very profitable business that has attracted over $1bn in investment since its acquisition in 2011”.

“We have successfully traded through a very difficult 12 months and are now seeing increased demand for road transport fuels and improving refining margins which have resulted in increased throughput at the Stanlow Manufacturing Complex.

“We are not a levered business and prior to coronavirus were posting earnings before interest, tax, depreciation and amortisation in excess of $300m per year.

“We remain confident that we can manage through this period and come out stronger as the economy clearly continues to recover.”

The Department for Business, Energy and Industrial Strategy said: “We do not comment on individual companies.

“The government has put in place a far-reaching package of support to help businesses across the economy during the pandemic, including the furlough scheme, loans and VAT deferrals.

“The government continually monitors fuel supply across the country to ensure the public do not see any disruption.”

The crisis at Essar Oil UK is the latest industrial headache to hit Boris Johnson’s administration.

In recent weeks, it has rejected a request for £170m of financial support from the steel tycoon Sanjeev Gupta to shore up his ailing GFG Group.

Ministers are also waiting for a decision from the car manufacturer Stellantis about the future of its plant at Ellesmere Port.