Essar Oil UK plans to invest $ 250 million in its refinery at Stanlow, signaling its commitment to the refinery and the UK market more broadly, despite the challenges facing the business, including Brexit and the government’s commitment to an electric future for vehicles.
The 2018 investment will enable Essar Oil UK to raise its annual output to 75 million barrels of 68 million barrels, increase its crude oil basket and increase production of petrochemical products by 5% to 10%. “This investment confirms the group’s commitment to remain in the oil and gas sector and grow Essar Oil UK’s business,” said S Thangapandian’s CEO. The business remains largely concentrated in Great Britain, where it generates 85% of revenues, with the rest of its product sold on the European continent.
The company has invested more than $ 800 million in Stanlow since it acquired it from Shell in 2011, allowing it to increase hydrocarbon margins by more than $ 5 per barrel, increase petrochemical production by 10%, and add 37 crude oil to your wallet. “This investment will further open our basket and reduce oil costs, with a greater focus on high-performance products. you will see improvements in revenue and margin gains from where we are today,” added Thangapandian. Over time, the company has also reduced its dependence on the North Sea, going from more than 80% to between 50 and 75%.
Aviation fuel business
He said the company, which supplies 16% of the UK’s road transport needs, would continue to expand in the direct fuel supply business as it won contracts to supply Emirates, Etihad, Jet2.com and Oman Air. He added that he would also continue to expand his own retail distribution network in the United States. It currently has 36 retail outlets and plans to establish 400 brand retail stations in the U.K. in the next five years.
While the collapse of the pound after last year’s referendum had led to a reduction in costs in dollar terms (to the extent of $ 40 to $ 45 million) the company remains cautious about the long-term impact of Brexit in business. “We are playing day by day and see how things happen … there is no clarity about what is going to happen,” he said.
The company was reviewing how to address the sector’s challenge to the “ambitious” targets set by the countries of Britain and the EU to move towards electric vehicles (Britain intends to ban the conventional combustion engine before 2040). “We are considering it very seriously … we see it as a great challenge in the coming years … we have started internal talks with a central team to see how this will affect the oil sector and Stanlow, and we are looking at moving from typical transport to products of greater added value “. Government policy had already begun to affect the balance of demand, away from diesel, which had previously experienced strong growth, returning to gasoline.
The announcement came as after-tax profits fell to $ 168 million for the year ending March, compared to $ 244 million a year earlier, as the industry benchmark fell more than $ 2 the barrel. “Our excellent operational reliability and ongoing margin-reinforcement projects saw our own margins narrow by less than half this amount, which demonstrates the tremendous progress made within the business,” he said. “Our strategy is to build a successful and sustainable future for the Essar Oil UK business.”
