Coryton Oil Refinery

Stephen Metcalfe Excerpts

Wednesday 27th June 2012 Commons Chamber

[Stephen Metcalfe (South Basildon and East Thurrock) (Con)]

Thank you, Mr Deputy Speaker, for giving me the opportunity to express the grave concern that surrounds yesterday’s announcement that the Coryton oil refinery in my constituency will close. When the company was placed into administration five months ago, many of us believed that, because of its profitability and its productivity, it would not be long before it found new owners. So, five months later, and with no buyer coming forward to operate the site as a refinery, I have to say that this is a very sad day. I had hoped that this debate would never have to take place.

The intention of my debate before the announcement was to lay out the fact that this was not just another business in administration. I would have explained to the House and the Minister the importance—strategically, economically, socially and historically—of the Coryton oil refinery. Before I proceed, I want to place on record my heartfelt thanks to everyone who has been working so hard over the last five months to keep the refinery operating.

[Jackie Doyle-Price (Thurrock) (Con)]

I associate myself with those comments and pay my own personal tribute to my hon. Friend the Member for South Basildon and East Thurrock (Stephen Metcalfe), who has worked tirelessly behind the scenes to bring all the interested parties together. He has done so with dedication to achieving the outcome rather than to generating column inches, which has been the characteristic of some Opposition Members. Does he agree that the Minister of State, Department of Energy and Climate Change, my hon. Friend the Member for Wealden (Charles Hendry), who will reply from the Dispatch Box today, has also been absolutely sincere in his commitment to achieve a positive outcome for the refinery?

[Stephen Metcalfe]

I thank my hon. Friend for her comments. Yes, I would like to thank the Minister personally for his help and support. I would also like to thank Ministers from the Department for Business, Innovation and Skills and from the Treasury for what they have done to help me work with all those involved to find a solution.

[Ian Lavery (Wansbeck) (Lab)]

Will the hon. Gentleman give way?

[Stephen Metcalfe]

I am afraid that time is limited; I am sorry, but no.

The people I want to thank the most are the staff, the management—particularly Jon Barden and Georgina Clarke—and, of course, the unions. Without their commitment, the business might well have closed months ago. Instead, it had time to search for a buyer and to explore a range of options that might have led to the securing of its long-term future.

The refinery has changed ownership many times over the years, most recently in 2007, when it was acquired by a Swiss company, Petroplus, and became one of a group of five refineries. Unfortunately, in January this year the parent company—Petroplus—got into financial difficulties and filed for bankruptcy, at which point Coryton placed itself in administration with PricewaterhouseCoopers. Of the five refineries, Coryton is far the most complex. It has a Nelson complexity index of 12, making it one of the most sophisticated refineries in Europe. It is very profitable, and I believe that, because of its complexity and its location, it is also of great strategic importance, not least because it provides 20% of the fuel in the south-east and 10% of that in the United Kingdom. However, because of the structuring of the parent company, when Coryton went into administration it had no fuel assets and nothing in its bank accounts, although it did have £2 billion of debt held in bonds that the parent company had issued.

[Rebecca Harris (Castle Point) (Con)]

Must it not be utterly dismaying for the work force of 900 people in what was a very successful and profitable refinery to find that that they are losing their jobs, although the parent company was able to go on leveraging debt against that successful refinery?

[Stephen Metcalfe]

Yes. When the company went into administration, finding that all the debt was leveraged against that one refinery must have come as a shock to all concerned. That just shows the mismanagement of the parent company in Switzerland.

Once appointed, the administrators stabilised the situation and began looking for a long-term solution. Two options soon emerged, although I am sure that many others were investigated: sale to a third party and financial restructuring. The financial restructuring process began very well, but it became obvious fairly quickly that there was a large funding gap and it would not be workable. As for the sale side, PWC invited expressions of interest and numerous possibilities emerged, from lift and shift to sale as a refinery and, finally, sale as a fuel terminal, which would give a fuel company greater access to the Thames and therefore to the south-east. The site has always been considered particularly attractive owing to its close proximity to London and its deep water jetty, but ironically those factors are now to be the refinery’s downfall.

I understand that following examination of the offers, a Russian consortium was identified as having presented the most favourable bid. It wanted to operate Coryton as a refinery, thus saving the 900 to 2,000 jobs that it supports. The next best bid came from a bidder that wanted to operate the site as a terminal. In the light of yesterday’s announcement, many have expressed surprise that no one wanted to buy the site as a refinery. Although I do not possess all the details, I do not believe that that is the case. What I do believe is that a number of credible, sustainable bids were presented, but that none of them ultimately exceeded the bid for an alternative use. I shall say more about that later.

Last month, despite all that hard work, the administrators, PWC, made the announcement—which I think we had all prayed we would never hear—that no credible offer was on the table and no one was willing to operate the refinery, and that therefore it was proceeding towards closure. As I have said, I believe that there were credible offers on the table, but that they were not high enough. Yesterday, PWC struck a final blow and announced that it had done a deal with Shell to operate the site as a terminal. The timing of that announcement—before tonight’s debate—made redundant much of the case that I wanted to build to save the refinery, but I ask the House to bear with me none the less.

As Members can imagine, following that announcement the situation has been very fluid over the last 24 hours. The one thing that has been constant is the contact that I have received from numerous parties expressing deep concern about the way in which the administration has been conducted. They talk of great secrecy surrounding the sale; they say that alternative outcomes could have been explored but were not, and that barriers were put up.

Following yesterday’s announcement, I have a better understanding of the events that led up to it, and I think it important to examine those events. My current understanding is that the Russian-led team bid the highest amount, and that the bid was proceeding well until something happened. I have no idea what that something was. I have a number of notions, but I cannot confirm any of them. Whatever happened, however, the upshot—so I am told—was that that information was not communicated properly by the administrators to the buyers. I have to say I find that extraordinary—although in light of my own experiences, not surprising. I still have not been officially informed by PWC that a deal has been done. Although I have attended every stakeholder meeting, I found out yesterday, when the press contacted me—although I did subsequently have an e-mail from one of the partners, Vopak.

[Jackie Doyle-Price]

Naturally, as we have reached the endgame, there is lots of rumour and speculation, and certainly the Russian bid has been trying to get its case across since discovering it has not won. Is there not the following alternative theory, however: far from this having been in the hands of the administrators, a view was taken that perhaps the company in question was not good for the money and was looking for an opportunity to drop the price? Shell is part of the winning consortium, and given that Shell Haven has been closed, and given, too, the supremacy of this location—as my hon. Friend described—would not Shell have gone for any price?

[Stephen Metcalfe]

It is difficult for me to speculate about what might, or might not, have happened and what discussions might have taken place, but I will say that more than one company has been in touch with me.

I find it extraordinary that the administrators, charged with getting the best deal for the bond holders—to whom, after all, they are responsible—did not inform the company with the largest bid at the time that there was some problem or the situation had changed. Perhaps if things had been different and if communications had not broken down, we might have been in a different position. I do not know what happened, but the upshot was that the bid was dropped. I believe that at that point trust broke down between the administrators and the Russian consortium wishing to buy the refinery. For the record, I have been aware for some time that both parties in this main bid were represented by PWC and while I make no comment about the existence of a Chinese wall I would be very interested to hear how both sides view the behaviour of the other, bearing in mind they were both from the same firm.

As I said many times in the run-up to yesterday’s announcement, there has always been another bidder. I am concerned that it might not have been given a fair crack of the whip. I do not know whether that is true. This is a complex situation and I do not pretend to have the expertise required to pick through the detail and assess the quality of the arguments, from both sides, about what happened.

[Rebecca Harris]

Is it not crucial that we get to the bottom of this for the sake of all the people who will be losing their jobs, as well as other people in the supply chain? We need to know what went on, and that everything possible was done.

[Stephen Metcalfe]

I entirely agree. There could have been a different outcome if there had been more openness and transparency on all sides. I do not attribute fault to anyone, but these events need to be looked at. That different outcome could have been more beneficial to the bond holders, but my primary concern is, and will continue to be, for the work force who will pay the price for this breakdown in communications.

For those unfamiliar with the refinery, I want to put it in historical context and explain its local importance. South Essex has a long and proud industrial heritage. At one time there were three refineries along the Thames. After PWC’s announcement, there will be none. When we talk about this refinery closing, we are not talking about just another business that got into trouble and failed to meet the challenges of the modern world. On the contrary, it was a very profitable business. It met the modern challenges. It was part of our collective DNA in south Essex. It was part of the very fabric of society there; people moved to work there. If it goes, the economic blow will have the biggest impact, however.

[Ian Lavery]

I congratulate the hon. Gentleman on securing this important debate. I have experienced exactly the same situation in my constituency, and he is right in what he is saying about jobs. Thurrock council carried out an impact assessment study which showed that more than £100 million would be lost as a consequence of the closure of the refinery. Why did the Government not even ask the European Union whether state aid was available to save these jobs?

[Stephen Metcalfe]

Those discussions have been taking place behind closed doors and in private. I am sure that the Minister will tell us in his response what the reasons were and what avenues were explored. I can tell the hon. Gentleman that Thurrock council’s economic impact assessment, conducted by DTZ, estimated the impact to be closer to £1 billion. That represents a potential contraction in economic activity of 0.07% of the national economy, which is getting close to a third of the contraction we experienced in the past quarter. One of my arguments has always been: are we really willing to let that go without exploring every avenue? That is one of the questions I have asked in private, and I am hoping that we will hear it answered by the Minister in public this evening.

As the House will be aware, that call for state aid, including from me, has been growing over the past few weeks. I have raised the issue on the Floor of the House and, as I say, in private. I have asked that Ministers examine every conceivable angle, and check and double-check that there is no way they can help within the boundaries of what is possible.

We have to remember that the refinery spends tens of millions a year in the UK on maintenance, chemicals, utilities and business rates. Every three to four years it has a maintenance project, which results in approximately £150 million being spent in the UK, and that was due to take place this autumn. The impact of this closure will be felt across the whole country, but the hardest hit of course will be those in the local area. The economic cost will be great. In employment terms alone, the closure of Coryton will affect 800 families directly through the loss of employment, leaving aside those who work for suppliers. That is 800 families who will now have a more difficult time feeding their families—putting food on the table. To add salt to the wound, if the planned turnaround project had gone ahead this autumn, the number employed there may well have risen to more than 2,000. It is hard to underestimate what a blow this is; we are exporting manufacturing jobs and replacing them with service jobs, and nothing like in the same numbers.

I had also hoped, despite the work the Department has undertaken on developing a refining strategy, to persuade the Minister to look again at the issue of diesel capacity; I had hoped that he might move on that just a little. As he will be aware, I and the Government are being accused of not doing enough to support this business—not doing as much as was done for the banks—so all I can do now is to seek publicly answers to questions that I have put privately for months. I realise that the Government were highly unlikely to be in a position to purchase the business, but I wanted to look for a more imaginative solution where they support the business on a commercial basis or through some form of loan guarantee.

In light of the above, I wish to put a number of questions to the Minister. First, will he confirm that he and colleagues from across the Government looked at every conceivable angle on providing some form of financial assistance for this business so that it could be kept open? Will he tell the House whether he or any of his colleagues received a formal, structured and specific request for state assistance from the administrators, or were discussions just of a vague nature, along the lines of, “It might be helpful if some money was put across”? Can he reassure the House that the full level of economic impact was taken into account when they were deciding whether financial intervention was possible? By far the biggest impact will be on jobs, so what steps are the Minister and colleagues across the Government taking to support those who are losing their jobs, and when will that support be available?

Finally, in the light of the information that has been handed to me in recent weeks, of what I have said this evening and of the concern that has been expressed about the process, the way in which it has been handled and the fact that the refinery is of such significance, will the Minister support my call for a parliamentary inquiry into the process, if for no other reason than to ensure that everyone, from the work force and the bond holders to each and every stakeholder, has been treated fairly by this process?

[Mr John Baron (Basildon and Billericay) (Con)]

I congratulate my hon. Friend on his hard work. He knows he has had our support in his endeavours. Given the valid concerns he has raised, can he explain where the downside is of having a parliamentary inquiry?

--- Later in debate ---

[Stephen Metcalfe]

Having considered it, I cannot see a downside. It would reassure people that the process had been transparent, open and conducted in a way that fulfilled all the legal requirements and that there were no other options.

I do not want to give false hope, but I do want to give the assurances that there could have been no other possible outcome from the one announced yesterday. This is a sad day for the UK refining industry, a sad day for south Essex and a sad day for all those who have worked in and been connected with the refinery in the past. Above all, it is a very sad day for the hundreds of people who are currently working at the refinery and who after yesterday’s announcement will no longer have a safe and secure job and will be looking for new employment. I ask the Minister to do whatever he can to address the points I have raised.