Production steadily ramping up as lockdown eases, says oil refiner Essar

Stanlow oil refinery

Essar Oil UK, owner of the former Shell Stanlow oil refinery near Ellesmere Port, this afternoon (April 16), said it has seen a huge increase in product sales as lockdown rules ease and demand for petrol and diesel increases.

It said it expects the Stanlow refinery to see a 63% year-on-year increase in product sales – diesel/gasoil, mogas, DPK/Jet and other products – to 537,000 tonnes in April 2021, compared with 329,000 tonnes in April 2020.

By way of comparison, sales in February 2020 were 661,000 tonnes.

These figures confirm that EBITDA for April 2021 is expected to be positive for the first time since the coronavirus pandemic and subsequent national lockdowns began in March 2020.

The company also said that projections for subsequent months look increasingly positive, as the easing of lockdown restrictions has resulted in increased demand for road transport and aviation fuel.

It has been reported that Essar is in talks with the Government as well as various finance organisations over potential support, due to the massive drop in production and income as travel throughout the UK was curtailed and airline fleets grounded due to the pandemic.

A company spokesperson said: “We are in constructive discussions with multiple finance providers and are confident that we will put in place an optimal financing solution for the company. At this stage, we are not prepared to comment on specific names.”

In a normal year the plant would produce around 10 million tonnes of fuel products.

But the company today stressed that it is not levered and has no long term bank debt. It said Stanlow continues to produce and sell high value products, with a value of approximately $700m a month.

Demand has been increasing since February 2021 and has continued to do so during the current month, as pandemic restrictions begin to loosen.

It said some short term financial disruption was caused recently when a bank decided to amortise a credit facility related to the company’s receivables. This allowed the company to be paid immediately for sales, rather than waiting for up to 30 days.

However, this change did not have a material impact on the company’s operations or financial outlook, it said.

And it revealed that more than half of the facility has, in any event, quickly been replaced by securing alternative financing facilities.

Essar is confident that replacement arrangements for all the facility will be secured in the near term, but, it reiterated, this will not effect operations at Stanlow.

The spokesperson added: “As lockdown restrictions ease and the country returns to normality, demand for our products is already increasing.

“All factors indicate that this is likely to continue and, therefore, our financial position will strengthen over the coming months.

“In the four years to 2019, the company generated EBITDA of over $300m a year. Any short term disruption is mitigated by the underlying strength and outlook of our business. We remain fully focused on supporting the customers and industries who rely on our products.”

It is estimated that Stanlow produces 4.4bn litres of diesel, 3bn litres of petrol and 2bn litres of jet fuel.

The site directly employs around 900 staff, with up to a further 800 contractors also located there.