Essar Oil pays tax bill as revenues soar 83%

After a torrid 18 months Essar Oil UK on the banks of the Mersey has seen quarterly revenues soar 83% to £3.11bn and has paid its tax arrears. Tony McDonough reports

Stanlow
Stanley oil refinery is operated by Essar Oil UK and supplies 16% of the UK’s road fuels

 

Oil business Essar Oil UK (EOUK) says it’s finally back on track after a “challenging” 18 months with quarterly revenues up 83% to £3.11bn.

EOUK, which employs almost 800 people at its Stanlow refinery in Ellesmere Port, said sales volumes in April, May and June were up 10% year-on-year to 1.72m tonnes. But the soaring costs of fuel amid the war in Ukraine has boosted revenues.

One source of growing sales is the UK aviation sector. Essar supplies jet fuel to several UK airports including Liverpool and Manchester. Surging demand for post-pandemic air travel means a corresponding demand for aviation fuel.

Sales at the business plummeted for periods during the pandemic. This led EOUK to seek a number of sources of funding to shore up its balance sheet. In March LBN reported that the firm had suffered a pre-tax loss of £168m for the year to September 30, 2021. This was its second consecutive annual loss.

EOUK secured around £800m in extra cash. However, in the annual report the company said it was seeking a further $300m (£230m) in new financing after auditors warned about the financial health of the business.

Now the firm, which supplies 16% of the UK’s road fuels, appears to be turning a corner. In Wednesday’s trading update it said it had made the final payment to HMRC on an outstanding tax bill. At one point the arrears stood at £770m.

During the last quarter EOUK said it has focused on supporting UK energy security.  Middle distillates (mainly diesel) production is at record levels in response to UK shortages due to banning of Russian imports.

Its statement added: “The UK has historically been reliant on Russia to meet its diesel needs, and a key industry-wide challenge is to source these barrels from alternative domestic or non-Russian sources.

“In support of the UK Government’s announced ban on Russian imports to be implemented by the end of this calendar year, Essar ceased importing all Russian products (including diesel) from mid-April.

“The company has successfully replaced any shortfall from this strategy by maximising indigenous diesel production as well as sourcing non-Russian diesel…. All crude processed at Stanlow comes from US, West African and North Sea sources.

In June Essar took delivery of a new £45m furnace which arrived from Thailand via the Port of Liverpool. It will replace three existing furnaces at the Ellesmere Port site. Furnaces are essential to an oil refinery. The process of refining crude oil means it has to be heated to around 470 degrees.

 

Essar
Essar Oil UK’s hydrogen furnace arrives at the Port of Liverpool

 

Once installed it will be the first refinery-based hydrogen-powered furnace in the UK. It will initially run on gas but will switch to hydrogen by 2026 as part of the North West HyNet consortium.

In January the company announced the formation of Vertex Hydrogen. This will build the UK’s largest hydrogen hub at Stanlow. The £1bn investment, which will sit at the heart of the HyNet low carbon cluster. It will produce a total of 1GW per year of hydrogen from 2026.

Deepak Maheshwari, chief executive of EOUK, said: “After a very challenging 18 months, we have made huge progress on all fronts in the first quarter of 2022/23. Volumes are now largely at pre-COVID levels and we have been able to significantly strengthen our balance sheet and operating performance.

“We accelerated our support of the UK’s transition away from relying on Russian products and have ceased all Russian imports, while ramping up production of UK-made diesel. We look forward now with real confidence and a very clear strategy.”

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