Located on the banks of the Mersey, the giant Essar Oil UK refinery supplies 16% of all UK road fuels and it has now struck an agreement with HMRC over an outstanding £233m VAT bill. Tony McDonough reports

Essar Oil UK (EOUK) has struck a deal with HMRC over the repayment of an outstanding balance of £233m in VAT payments.

In April the company, which supplies a sixth of the UK’s road fuels from a giant refinery at Stanlow, 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.

At the weekend, EOUK played down reports in the national media that it was “on the brink of collapse”. It pointed out that over the past few months it had made great strides to shore up its balance sheet by successfully raising more than £800m in liquidity.

The company, which employs 900 people directly at Stanlow in Ellesmere Port and a further 800 contractors at the site, endured a torrid time during the pandemic lockdown when demand for fuel plummeted.

Now that company says there has been a significant recovery in demand for its products and said it returned to be EBITDA (an alternative measure of profitability) positive in the summer. While demand for aviation fuel remains low, demand for road fuel has returned to normal levels.

On Tuesday afternoon, EOUK said it had entered into a new time-to-pay agreement with HMRC. A phased payment schedule, aligned with EOUK revenues, has been agreed.

In a statement the company added: “Throughout the pandemic, including during the period that fuel demand was at very low levels, EOUK continued to run its Stanlow refinery, instead of shutting it down, to ensure adequate fuel supply to its customers across the UK.

“In light of the on-going supply issues, EOUK has reached out to its refinery customers and offered additional supply to ease the recent fuel constraints. EOUK has successfully increased vehicle shifts per day, from around 52 vehicle shifts per day in early August to more than 70 today. This is expected to surpass 80 shifts by the end of October.”

It said that road fuel sales volumes from EOUK’s Stanlow, Northampton and Kingsbury terminals over the last weekend were up 22% against a “normal” weekend (pre-COVID). On Friday, September  24, sales volumes from the three terminals were up 14% on a “normal” Friday. 

Satish Vasooja, chief financial officer of EOUK, said: “I would like to thank HMRC for its support. With this time to pay arrangement, we now have a significant runway to stabilise our balance sheet which has been adversely impacted by the pandemic.

“The improved environment around margins gives us the confidence to continue to serve as one of the UK key fuel suppliers with a 16% market share. We will also progress our future energy transition programme whilst also supporting a large proportion of the UK’s much needed fuel supply.” 

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.