The panic-buying of petrol and diesel that gripped the UK successful September served arsenic an unwelcome reminder of however disruption to supplies tin rapidly escalate into crisis. But portion the agelong queues connected forecourts person gradually receded, concerns persist astir the finances of refineries supplying astir 25% of fuel.
Financial difficulties afflicting 2 of the UK’s remaining lipid refineries person raised concerns successful authorities astir their little-known ties to a Kremlin-allied lipid concern and a commodities trading location nether probe for corruption, the Guardian understands.
Prax Lindsey lipid refinery, successful northbound Lincolnshire swung from a £1.9m nett to a £228m nonaccomplishment successful the twelvemonth to February 2021, wounded by the Covid pandemic crushing request for fuel, accounts filed astatine Companies House show.
The punishing nonaccomplishment comes conscionable weeks aft Stanlow lipid refinery successful Ellesmere Port, southbound of the Mersey, was granted a impermanent reprieve from the imaginable of a winding up bid from HM Revenue and Customs. HMRC gave a “time-to-pay” woody to Stanlow’s owners – the billionaire Ruia brothers down India’s Essar conglomerate – allowing breathing abstraction to stump up £223m successful overdue VAT.
Essar Oil (UK), the institution that houses Stanlow, mislaid $221m (£162m) successful the twelvemonth to the extremity of 30 September 2020.
The threadbare finances of those 2 refineries underline the vulnerability of Britain’s substance proviso – and however these important pillars of UK infrastructure are tied to obscure sources of funding. Of the nationalist capableness of 60m tonnes of refined fuels per year, Stanlow tin nutrient much than 16% and Lindsey astir 9%.
Previously, the refineries were owned by lipid “supermajors” – Shell and Total – that needed an outlet for their product. Now, though, some are successful the hands of acold little well-known players.
And, according to sources acquainted with discussions successful Westminster, Stanlow’s spot successful the fiscal architecture of Essar, an Indian conglomerate but acold little good known successful the UK, was a origin successful governmental reluctance to see a bailout, had 1 been required.
Accounts for Essar Oil (UK) amusement it agreed to lend up to $375m to Mauritius-based Essar Oil & Gas Limited successful 2019 and was this twelvemonth considering extending a further $400m loan.
Days aft accounts detailing these loans were filed astatine Companies House, it was revealed that Deloitte had resigned arsenic Essar’s auditor, citing a request for improved governance, “in peculiar regarding loans and advances”. The loans were made astatine the behest of Essar Oil (Cyprus), Stanlow’s genitor company, accounts show. That Cypriot entity has besides collected £500m successful dividends from Stanlow since 2017.
The refinery’s evident links to Russia person besides raised governmental concerns, the Guardian understands. Companies House filings uncover that Essar Oil (UK) registered a complaint – information for a indebtedness – successful favour of Litasco, a Switzerland-based lipid trading part of Moscow-based Lukoil.
Lukoil is simply a £50bn lipid elephantine founded from the ashes of Soviet Russia by its president and main executive, Vagit Alekperov, who besides owns much than 20% of the institution and appears to beryllium connected convivial presumption with Vladimir Putin.
In June, Essar Oil (UK) appointed Tim Bullock, a erstwhile main enforcement of Litasco betwixt 2012 and 2018, to its committee arsenic an autarkic non-executive director, which it said would fortify governance. Essar said Bullock nary longer had a relation astatine Litasco and owns nary shares successful it.
According to the Companies House documents, Litasco has a assertion connected Stanlow assets that would footwear successful if the refinery were to default connected its [undisclosed] obligations, meaning the assets could autumn into the hands of the Lukoil subsidiary if the indebtedness was defaulted on.
That assertion is specifically implicit Stanlow Terminals Limited, a cardinal portion of the sprawling Stanlow complex, wherever crude lipid from astir the satellite is dropped disconnected and stored earlier being refined.
One seasoned of the refining manufacture said that owning the retention installation could springiness Lukoil a “ransom strip”, a portion of onshore that tin beryllium utilized to crook the screw connected anyone who needs access.
Essar Oil (UK) said: “Like each refiners, EOUK was heavy impacted by the pandemic. Despite this, we’ve strengthened our equilibrium expanse done backstage financing, taken enactment to bolster governance, and are trading profitably again.
“Since Essar’s acquisition successful 2011, $1bn has been invested successful Stanlow to marque it 1 of the astir blase refineries successful northbound westbound Europe. Overall, EOUK is successfully navigating done the pandemic and emerging robustly. We are assured astir the beardown request betterment and our aboriginal prospects successful an evolving debased c vigor market.”
Essar says Lukoil and Litasco are abstracted firm entities and that Litasco has nary quality to power operations astatine the Stanlow terminal.
In 2017 Essar sold its immense Vadinar lipid refinery, successful Gujarat, India, to a consortium including the Russian state-controlled lipid steadfast Rosneft and the commodities trading location Trafigura successful a £10bn deal.
As of this year, Trafigura besides has a important involvement successful the Lindsey lipid refinery successful Lincolnshire. In March, the French lipid institution Total sold the refinery to Prax, a portion of a little-known outfit headquartered successful Surrey called State Oil, which has grown astatine meteoric pace, its revenues surging astir tenfold betwixt 2010 and 2020.
Its controlling party, Winston Soosaipillai, who goes by his mediate names of Sanjeev Kumar, is seldom spotted successful nationalist oregon astatine manufacture events and has astir nary nationalist profile. The institution said it was a “natural progression” to get the Lindsey refinery but did not reply much elaborate questions.
In March 2021, the aforesaid period that the institution bought Lindsey, it registered charges successful favour of Trafigura, the planetary commodities trading location based successful Singapore, portion of a proviso agreement.
If Prax were to default connected payments owed to Trafigura via that agreement, the complaint documents say, the commodities trader is entitled to prehend power of contracts to proviso substance to BP, Asda and Certas Energy.
In May 2020, the Guardian revealed that Trafigura was nether probe by authorities including the US Department of Justice, which is looking into suspected corruption and marketplace manipulation. Trafigura declined to remark astatine the time.
Officials successful Westminster are understood to person go uncomfortably alert of Prax’s ties to Trafigura successful caller months, peculiarly successful the airy of the US investigation.
Keeping tabs connected who owns the UK’s six large refineries, not to notation the individuality of their creditors, is each the much important arsenic the assemblage creaks nether soaring lipid prices and volatile demand.
The pandemic has been “pretty ugly”, according to Alan Gelder, a refining and chemicals adept astatine vigor consultancy Wood Mackenzie. “[Financial nonaccomplishment astatine Stanlow] was a precise existent hazard a mates of months ago, which is erstwhile the concern was looking peculiarly dire,” helium said.
Refineries request to tally adjacent to capableness to marque wealth but their output fell by 19% past twelvemonth amid the pandemic. Longer term, extinction is connected the cards, with the authorities banning caller petrol and diesel cars by 2035.
Refineries that survive, says Stone, volition beryllium those with deep-pocketed owners, specified arsenic ExxonMobil’s Fawley adjacent Southampton and Pembroke successful Wales, owned by the US steadfast Valero.
As 1 manufacture seasoned put: “We’re connected a way representation to 2 oregon 3 refineries, it can’t beryllium immoderate different. Either we’re not going to decarbonise oregon we are. And if we do, we’re going to adjacent refineries.”