Owner of the giant Stanlow oil refinery close to the River Mersey returns to profit after battling for its survival during the pandemic and reports revenues of more than £9bn. Tony McDonough reports
Oil refinery giant Essar Oil (UK) has finally put the fraught days of the pandemic behind it with a return to profit.
Essar directly employs almost 900 people at the Stanlow Refinery in Ellesmere Port, close to the River Mersey, in addition to hundreds of contractors working on the site. It is the second-biggest oil refinery in the UK and supplies 16% of the UK’s road fuels.
However, multiple lockdowns during the COVID pandemic sent demand for fuel plummeting. This put Essar under considerable financial strain and during 2021 and 2022 it raised more than £1bn in extra financing from a number of sources.
At one point its auditors warned that the uncertainty “may cast significant doubt on the company’s ability to continue as a going concern”. The company also faced a hefty tax bill from HMRC.
Now EOUK has reported its annual results for the 12 months to March 31, 2023. In the previous year it had changed its accounting period so the latest figures are compared to a six-month period. But they still offer an accurate snapshot of the company’s recovery.
In the latest 12-month period revenues totalled £9.26bn (the company reports in US dollars and the figures here are a conversion to sterling at the time of writing). This compares to £3.9bn for the previous six month period.
Essar’s turnaround is illustrated in its return to profit with the pre-tax figure coming in at £7.9m. This compares to a hefty loss of more than £50m in the previous six-month period.
Writing in the annual report, chief executive Deepak Maheshwari, said: “The group’s operational and financial performance during the 12-month period improved significantly in comparison to the previous reporting period.
“This is due to increased demand for petroleum products and consequently higher refining margins.”
Essar contributes significantly to shipping activity on the Mersey and there are more than 700 vessels coming in and out of the Mersey every year. Supertankers berth at the Tranmere Oil Terminal next to the Cammell Laird shipyard.
They delivered more than 65m barrels of crude oil in the 12-month period from the North Sea, Africa, the US and Canada. Once unloaded at Tranmere the oil is then piped several miles underground to Stanlow.
A further 500 smaller vessels a year call at the refinery itself via berths on the Manchester Ship Canal. They pick up and transport multiple refined products. Essar also supplies aviation fuel to a number of UK airports including Liverpool and Manchester.
Although its primary products are fossil fuel based the company has committed to decarbonising its own operations over the next few years. It aims to reduce its emissions by 75% by 2030 and be net zero by 2040.
“The group has a comprehensive plan to decarbonise refinery operations, including energy efficiency, fuel switching and carbon capture,” added Mr Maheshwari.
Stanlow is also a key location for the creation of a £2bn hydrogen production and carbon capture facility.
Through its subsidiary Stanlow Terminals, Essar has also announced plans to develop the UK’s largest biofuels storage hub over the next three years. This will deliver 300,000 cubic metres of capacity.
Mr Maheshwari said: “The market for energy from renewable sources in the UK is expanding rapidly, driven by legislative obligations to encourage lower carbon fuels.
“Additional storage investment opportunities for low carbon energy products are all progressing through feasibility studies. These investments reflect the growing demand from partners and customers.”
As well as Stanlow, Essar Oil UK also owns a refinery at Northampton, a 45% stake in Kingsbury Terminal in a joint venture with Shell and an 11% stake in UK Oil Pipelines. It also operates 71 retail petrol outlets.
Its ultimate parent company is Essar Global Fund based in the Cayman Islands. The accounts also show directors’ remuneration, including salaries and pensions, came to £1.5m. The highest paid director received more than £900,000.