It’s sad news that a buyer could not be found to keep Coryton as an operating refinery. The loss is a blow to the local economy and the many people who work there.
The news that it will be sold to a joint venture of Shell, Greenergy and Vopak, to be developed as an import storage terminal, is welcomed, but the fact that a well-located, seemingly profitable refinery could not find a buyer is a stark reminder of the pressures facing the downstream sector.
UK refining operates in a global and highly competitive market. The balance between indigenously manufactured and imported refined product has always been set by the market and investors.
For many years there has been trade in refined products between the UK and other countries. Our own refineries benefit from this export trade in the same way that non-UK refiners do when exporting their products to the UK.
Over-capacity in European refining (overall capacity as opposed to output of some specific products where imbalances persist) is leading to re-structuring by owners in different ways closure, sale and reduced throughput. Since 2009, eight European refineries have ceased operations, accounting for around 6% of total EU refining capacity, of which two have been in the UK.
Restructuring is inevitable but UKPIA’s objective is to try and make sure that the policy environment in the UK does not undermine the competitiveness of our remaining refineries.
So UKPIA welcomes and supports the analysis being undertaken by DECC to examine the influences upon the competitiveness of UK refining.
We expect this analysis to help inform a future policy framework by quantifying the benefits of retaining an indigenous refining base from the perspective of security of supply/resilience and other benefits to the economy; likely evolution of the refining base; and identifying those areas of policy that can help create a level playing field in comparison with overseas competitors, avoiding disincentives to investment.
A report from DECC is expected towards the end of the year. In the meantime, enjoy the Olympics and the rest of the summer if, and when, it arrives!