Oil Refining Sector

Martin McCluskey Excerpts

Wednesday 14th January 2026 Commons Chamber

[The Parliamentary Under-Secretary of State for Energy Security and Net Zero (Martin McCluskey)]

I thank the hon. Member for Brigg and Immingham (Martin Vickers) for securing this debate. I know that he and other hon. Members, including my hon. Friend the Member for Great Grimsby and Cleethorpes (Melanie Onn), have been engaging closely on this issue with the Minister for Energy, who stands ready to continue to engage with them on the detail.

Let me start with Prax Lindsey oil refinery. It entered insolvency on 30 June 2025 because of the untenable position in which the owners left the refinery, which gave the Government very little time to act. I know how difficult the process has been for the workers, their families and the local community. The insolvency process at the refinery is led by the court-appointed official receiver, who must act independently, in accordance with his statutory duties. Since the insolvency, we have worked with the official receiver to protect workers, and to ensure the safety of the site and the security of fuel supplies. That has also allowed time for bidders to express an interest in the site and its assets.

After a thorough process to identify a buyer for the site, the official receiver has determined that Phillips 66 is the most credible bidder and can provide a viable future for the site. I am glad to say that the sale is expected to complete in the first half of 2026. As many hon. Members will be aware, Phillips 66 is an experienced and credible operator of a Humber refinery, next door to Lindsey. It already supplies fuel to the region and has consistently turned a profit in recent years. The sale allows Phillips 66 to quickly expand operations at its Humber refinery.

The company has decided not to restart stand-alone refinery operations at Lindsey. In its words, not mine,

“Due to the limitations of its scale, facilities, and capabilities, evaluations have shown that the refinery is not viable in current form.”

Although that is disappointing, it is not totally unexpected, given the long history of problems with the business. We understand that the previous owners, Total, sought to sell the refinery for several years and sold it to Prax for a nominal amount. Since Prax’s acquisition in 2021, the refinery has recorded about £75 million of losses. In addition, following a thorough assessment of offers, the official receiver confirmed that no offer was put forward that would credibly see a return to refining operations in the next few years.

Phillips 66 plans to integrate key assets into its Humber refinery operations, expanding its ability to supply fuel to UK customers from the Humber refinery. That is positive news for boosting domestic energy security, securing jobs—including hundreds of new construction jobs over the next five years—and creating future growth opportunities for renewable and traditional fuels. That being said, Ministers in the Department and I recognise that this is a very worrying time for workers, and I am glad to report that the remaining 250 directly employed workers are guaranteed employment until the end of March, although that will be cold comfort to many of them. Phillips 66 will provide further information on the number of jobs that will be retained as it moves towards completion of the sale in coming months. The Minister for Energy has asked Phillips 66 for clarity as soon as possible, and to retain as many jobs as possible. The Government will continue to support the 124 workers affected by redundancy last October.

[Richard Tice]

The bottom line is that P66 is mothballing the site, and will use certain bits of it for parts, rather than investing in its other site. Will the Minister allow a full, open and transparent look at alternative bids that would have kept the site open, and would have allowed us to keep many more jobs and to retain a strategic national asset?

[Martin McCluskey]

The hon. Gentleman will know that such discussions are commercially confidential, and the official receiver has undertaken an independent process to come to his decision.

As my hon. Friend the Member for Great Grimsby and Cleethorpes mentioned, the support for the 124 workers affected by redundancy last October includes a training guarantee to ensure that they have the skills that they need, and are supported to find long-term jobs. That goes above and beyond the usual support offered in insolvency situations. I am pleased to confirm that many —the majority—of those workers have already taken up this offer. My hon. Friend the Minister for Energy will be pleased to discuss any issues that my hon. Friend the Member for Great Grimsby and Cleethorpes thinks may emerge to do with the training guarantee.

I believe that the agreement with Phillips 66 marks the next step in securing an industrial future for the site and for the workers, who were badly let down by the former owners. The circumstances surrounding the insolvency are deeply concerning, and that is why the Energy Secretary immediately demanded that the Insolvency Service launch an investigation into the owners’ conduct and the circumstances surrounding the insolvency, which is ongoing.

Turning to issues in the broader UK oil refining sector, the UK’s refineries continue to play a vital role in maintaining reliable supplies of essential fuels that keep transport moving, industry operating and support households with their day-to-day lives. We appreciate that their contribution goes far beyond fuel alone. They are anchors for local economies, providing well-paid, skilled jobs and supporting a wide web of supply chains, which involve everything from chemicals to plastics to advanced manufacturing.

Refinery facilities also enable the production of specialist materials that many of our industries rely on. For example, the Humber refinery produces the UK’s only anode-grade petroleum coke, used in electric vehicle technology, while Fawley’s output of specialised rubber helped to ensure vaccine vials could be produced securely during the pandemic. Crucially, our refineries are also adapting for the future. They are investing in modernisation, low-carbon fuels, and technologies such as carbon capture, which are all essential to the UK’s transition to net zero. The Humber region will have a major role to play in that over the coming years. While overall fuel demand is expected to shift over time, sectors such as aviation, maritime and heavy industry will continue to depend on refined products well into the future. We want to preserve our refining sector and keep it competitive.

[Melanie Onn]

On the point about keeping UK oil refineries competitive, what will be the Government’s position at the European Union summit in May, in discussions on the emissions trading scheme? What will they take forward?

[Martin McCluskey]

I will write to my hon. Friend on that point about the carbon border adjustment mechanism and the ETS.

As was set out in the autumn Budget, we are reviewing critical policies to address the challenges that the sector faces. I will briefly go through the steps that we have already taken to help the downstream sector adapt and stay competitive. First, through the renewable transport fuel obligation and the new sustainable aviation fuel mandate, we are backing the production and use of cleaner fuels. The Humber refinery is already delivering sustainable aviation fuels at scale, and refineries at Fawley and Stanlow are benefiting from Government support through the advanced fuels fund to bring next-generation fuels to market. We are also working to de-risk investment in sustainable aviation fuel production through the revenue certainty mechanism.

Secondly, we are working closely with industry on major decarbonisation efforts, including carbon capture and hydrogen projects, within industrial clusters such as Viking and HyNet, which will be central to keeping UK manufacturing competitive as global markets tighten emissions standards. The UK ETS Authority’s decision to maintain current benchmarks for the 2027 scheme year provides the consistency and breathing room that energy-intensive industries need to plan investments and manage costs effectively.

In the autumn Budget, we committed to assessing the feasibility of including refined products in the carbon border adjustment mechanism. That is a key priority for industry, and it would help ensure that UK refineries were not undercut by imports produced to lower environmental standards. Collectively, these measures signal our determination to create the conditions for continued investment, innovation and long-term competitiveness as we transition to a low-carbon economy.

Looking ahead, the Government are deepening their engagement with the sector to ensure a smooth and secure transition in the coming years. It is important to note that Minister Shanks led the first ministerial—

[Madam Deputy Speaker (Caroline Nokes)]

Order. The Minister will know that we do not refer to our colleagues by their names.

--- Later in debate ---

[Martin McCluskey]

Thank you for reprimanding me, Madam Deputy Speaker. The Minister for Energy led the first ministerial roundtable with the sector for more than a decade, and will continue to engage with the industry.

In closing, let me be clear: we recognise the importance of the Lindsey oil refinery and the Lindsey site to the local community and the national economy. The integration of its assets into the Humber refinery will boost energy security and support high-quality employment locally. The UK refining sector matters, and that is why this Government are acting. From supporting low-carbon fuel production and deploying carbon capture and hydrogen, to launching a call for evidence that will shape our long-term strategy, we will work with industry, devolved Governments and the community to deliver a managed transition.

Question put and agreed to.