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Essar may pump Indian fuel into UK

Petrol from India is likely to find its way into the UK market for the first time, after Essar Energy bought Royal Dutch Shell’s Cheshire oil refinery for $350m (£216m).

Essar may pump Indian fuel into UK Photo: ALAMY
Rowena Mason
By Rowena Mason 7:15AM GMT 19 Feb 2011

It is the latest deal in the struggling UK refining industry, which has found it difficult to stay profitable in recent years and is expected to face increasing global competition.

The $350m price tag is about half what Shell was initially expected to get for the Stanlow refinery, following 18 months of negotiations with Essar.

The Indian company, which listed on the FTSE 100 last year, has promised that jobs will be safe and the refinery will remain open.

A spokesman for Essar said the company had already identified a number of investments it wanted to make to increase output from 75pc to nearer 100pc capacity.

However, Essar is also interested in the site as a port for importing refined products from its giant Vadinar refinery in India, which is currently undergoing an expansion programme.

It is understood that Essar would have the capacity to send petrol products from India to the UK for the first time by the middle of this year.

Historically, most British petrol has been refined in the UK because European standards mean the fuel has to be of a higher grade.

However, refineries in Asia are now becoming more capable of producing fuel to higher European standards, opening the door to cheaper imports undercutting domestic UK refining. Grangemouth in Scotland recently received an investment from another Asian company, Petrochina.

Many of Britain’s refineries are up for sale at the moment, as oil majors change their business models to focus more on exploration and production. Chevron has been examining options for its Pembroke refinery in Wales and Total is trying to sell the Lindsey refinery in Lincolnshire. Murphy Oil is also trying to sell its Milford Haven plant.

Jim Pearce, a partner at AT Kearney, the advisory firm, said: “The integrated oil and gas model is under the microscope in most oil majors and the conclusion is often to divest refining.”


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