Liverpool city region oil refinery business Essar Oil UK has secured a new credit facility worth more than $850m (£600m) to shore up its balance sheet.

In April it was reported the business, which employs almost 1,000 people on the banks of the River Mersey at Stanlow, was seeking more cash following a fall in demand during the COVID-19 pandemic due to multiple lockdowns.

This led to speculation about the future of the business. However Essar said in April it was in talks with multiple finance providers about refinancing. Essar, which produces 16% of UK road transport fuels, also issued a trading update indicating a significant improvement in its trading position as demand increases with the easing of lockdown.

Now the company says the new credit facility will replace its previous one as well as offering additional capital, thereby strengthening its financial position. The funding is made up of liquidity from a diversified range of sources.

The company said these include bilateral arrangements with many of its key customers on enhanced payment terms and other long-term financings, linked primarily to the supply of crude oil.

With these financial arrangements now in place, Essar Oil UK has more low-cost liquidity to meet its upcoming requirements, and can continue to focus its energies on its transition to become a “low carbon energy provider of the future”.

It is already working on delivering two blue hydrogen production hubs at Stanlow, which will attract £750m in total investment. Follow-on capacity growth is planned to work towards the Government’s new target of 5GW of low carbon hydrogen for power, transport, industry and homes.

Stanlow is committed to reaching 80% of the Government-set targets. In addition, Essar Oil UK remains committed to delivering the necessary operational cost reductions at the refinery over the course of the coming year in order to help secure its long-term future and to ensure it remains competitive in its traditional refining business.

The business has also recently completed a review and update of its corporate governance and its board has adopted the recommendations arising out of that review process, which included independent input from Ashurst. As a result of that process, it has committed to appointing two independent non-executive directors to the board.

Essar Oil UK chairman Prashant Ruia said: “Securing this financing demonstrates the confidence all our stakeholders have in our long-term vision for Stanlow.  We believe this confidence will be further bolstered by the updates we have made to our corporate governance.

“These appointments will further enhance our overall governance and risk assessment processes, as well as providing insights and strategic inputs to the business as it continues its transition to low carbon operations.

“With a strong economic recovery driven by the UK Government’s roadmap out of the pandemic, I feel that our business has moved into a positive and progressive phase for the benefit of all of our stakeholders and employees.

“We look forward to furthering our investments in exciting new technologies, securing high-tech jobs and Stanlow’s future at the heart of the UK’s green revolution.”

Since acquiring Stanlow in 2011, Essar has invested more than £700m in the Essar Oil UK business. The site’s largest ever turnaround in 2018 saw the successful delivery of a project that increased annual throughput capacity from 68m to 75m barrels, as well as improving yields and driving revenues.

Essar is a major supplier in the North West and beyond with customers including most of the major retail brands operated by international oil companies and supermarkets, Manchester Airport, leading commercial airlines and the region’s trains and buses.

It is also responsible for more than 700 ships coming in and out of the Mersey every year. Around 140 vessels, carrying up to 170,000 tonnes of crude oil in a single cargo arrive at Tranmere Oil Terminal each year. The oil is then pumped to Stanlow along an eight-mile pipeline.

Stanlow employs more than 900 people directly at the 2,000-acre site, as well as around 800 contractors. A further 5,000 people are employed in the wider supply chain.

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