Petroplus UK refinery at Coryton will not receive state aid

15 June 2012 13:43  [Source: ICIS news]

LONDON (ICIS)--The UK government has decided against providing state aid to Petroplus’s Coryton refinery, after the insolvent company’s administrators were unable to find a buyer, the Department of Energy & Climate Change (DECC) said on Friday.

The DECC said in a statement that the government has looked very carefully at whether or not state aid should be provided for the Essex refinery, adding that it had come to the conclusion that existing overcapacity in the refining industry and declining demand for petrol meant that the refinery would not be sustainable.

This [state aid] would not be a long-term solution either for the taxpayer or for the industry, which will thrive best with open and fair competition,” said a government spokesman.

“If government did step in to help Coryton, this would be a short-term fix, and it could potentially lead to job losses at other refineries who would be at an unfair disadvantage to Coryton,” the spokesman added.

“This was a very difficult decision and it is particularly regrettable that people may lose their jobs,” said the spokesman.

Switzerland-based Petroplus filed for insolvency in January after lenders froze about $1bn (€790m) in credit lines in late December. The insolvency affected Petroplus’s five refineries in Europe, including the one in the UK.

However, the largest union in the UK, Unite, is asking the European Commission to clarify the rules on state aid for the refinery, which, according to Unite, follows allegations that the government dismissed the call for state aid without asking for the Commission’s approval.

The union added that the Labour Party’s shadow energy and climate change secretary, Caroline Flint, had written to energy and climate change minister Charles Hendry on whether the government had considered providing state aid for Coryton, where nearly 1,000 jobs are at risk, while a new owner was sought.

The minister had stated in his reply there was no evidence that such aid would be allowed under the European Commission state aid rules, said Unite.

“It is understood that the commission has been unable to trace any correspondence on state aid relating to Coryton from the Department of Energy and Climate Change,” it added.

Unite national officer Linda McCulloch said: “If this is true, this is a serious matter and needs an urgent government statement to clarify this matter.”
“Ministers should be doing everything possible to safeguard the nearly 1,000 jobs at risk at Coryton, and, more widely, ensuring the security of energy supplies to the UK when we face an uncertain future in terms of global energy provision,” she added.

“If they are not, this is a disgraceful dereliction of duty – and they should be called to account,” said McCulloch.

“Unite will also be approaching the Commission independently to clarify the rules on state aid as they relate to Coryton,” she added.

In response to the allegation, the government said it had not applied for permission to use state funds to the European Commission because of overcapacity in the refining industry and declining demand for petrol.

“It would not be sustainable for government to provide assistance, whether it was allowable under EU rules or not,” it said.

“Unless you want the aid and have a detailed proposal, the Commission will not support aid,” it added.

Unite said it has already called on the government to follow the example of the French government, which provided state aid to ensure the continued operation at Petroplus’s Petit Couronne refinery near Rouen in northwest France, and act in the national interest by giving state aid to keep Coryton running until a viable buyer can be found.

The government said the closure of Coryton as a refinery should not have any impact on supply of fuel to London and the south east of England, adding that there are many other supply points and operational refineries that can be used.

Earlier in the week, Richard Howitt, a UK member of the European Parliament, and Coryton workers attended a public protest against the closure. Howitt said public support is essential to force the government to end its refusal to intervene to save the threatened refinery.

($1 = €0.79)

By: Leigh Stringer
+44 208 652 3214

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