A media report claims Mersey refinery giant Essar Oil UK is ‘on the brink of collapse’ over an outstanding £223m VAT bill but the company insists its financial position is stable. Tony McDonough reports
Oil giant Essar Oil UK (EOUK) has hit back at media reports that it is “on the brink of collapse” over an outstanding £223m VAT bill.
A report in the Sunday Times claims EOUK, which employs 900 people at the Stanlow oil refinery in Ellesmere Port is in “urgent talks” with HMRC over the outstanding amount which is due to start repaying in the next few days.
In April the company, which supplies a sixth of the UK’s road fuels as well as airlines at Liverpool and Manchester Airports, owed HMRC £770m. However, it has since repaid £547m, leaving a balance of £233m. That is due to be settled by January with payments due to start this week.
EOUK says it is in discussions with HMRC over a short extension to the accelerated payment schedule that it had previously agreed. In a statement released late on Saturday night, it added: “Those discussions are positive and EOUK looks forward to a resolution soon.”
The company also insisted it was operating as normal despite widespread reports of fuel shortage across the UK during the past few days due to a shortage of delivery drivers. It said the North West petrol stations it supplies directly were all operating normally.
The statement said: “By taking action in early August to retain its driver base, plus sign up smaller hauliers, EOUK has in fact increased vehicle shifts per day considerably, ensuring security of supply to its customers at this critical time.”
There has been considerable speculation over the financial health of EOUK, owned by the Indian billionaire brothers Shashi and Ravi Ruia. The company endured a tough trading period during the UK COVID lockdowns with demand for road and jet fuel falling considerably.
The business has had to secure extra funding to shore up its balance sheet. It May it announced it has secured a £600m credit facility. Now the company has said it had agreed a further financing deal taking its available liquidity beyond £800m.
It also said Stanlow, which also provides employment for 800 contractors at its site on the banks of the Mersey, had now returned to being “EBITDA positive”. EBITDA is a measure of profitability. EOUK said it was now “in a much stronger position to weather the continued challenge presented by the pandemic”.
It added: “EOUK remains confident in its future, not least as the air travel market continues to open up and demand recovers.”
Since acquiring Stanlow in 2011, Essar has invested more than £700m in the EOUK 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.
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.