In the developed world, we tend to take the essentials – fuel and food – for granted. Ensconced in our routines, we forget that these items reach us at the end of a long supply chain, and that it is entirely plausible for this chain to be severed if certain factors conspire.
In recent months, a couple of events in the UK have thrown this fact into sharp relief. The more significant of the two occurred in March, as fuel distributors and tanker drivers threatened to strike, causing motorists to panic buy ahead of the Easter break. The second occurred earlier this month, when Manchester airport ran out of fuel, thus disrupting holidaymakers’ flights. Fuel supplied to the airport from the Stanlow refinery was found to be contaminated, which led to a supply pipeline being turned off.
These two events exemplify the fragility of supply. When transposed onto a national scale, the potential consequences are more alarming. The announcement of the closure of the Coryton refinery in Essex following the insolvency of its owner, Petroplus, signals the latest episode in a worrying trend. The 117 000 bpd facility supplies 10% of the UK’s total fuel products and employs 1000 workers in the local area, whose jobs are now in jeopardy. Its closure would leave only ExxonMobil’s Fawley refinery, Southampton, in close proximity to the London/South East region.
There are calls for the government to intervene. Trade union group Unite claim that the French government has contributed US$ 24.6 million to help save Petroplus’ Petit Couronne complex. In these austere times, it seems unlikely that the same would be done for Coryton. All is not lost, of course: there has been interest from buyers. Elsewhere, newer industry players such as Ineos have succeeded in turning a good profit from a UK complex with a troubled history (Grangemouth).
The UK previously had 18 refineries supplying its fuel. With the closure of Coryton, as well as Petroplus’ Teeside facility which was shuttered in 2009, it now has six. These statistics appear alarming, but they do not paint the whole picture. There may be fewer facilities, but those remaining have greater capacities and are more technologically advanced. This, coupled with less demand stemming from a weak economy, better engine fuel efficiency and a general push towards carbon consciousness, helps justify the shrinking sector.
But, in a trend that mirrors the slow and steady closure of Britain’s power plants, the country must ensure that it is equipped for the future. If these closures continue without arrest and the existing refining structure is lost, then the logical extreme suggests the country would have to rely on imports. Anyone who queued at a petrol station over Easter will testify to the vulnerability and frustration that can be felt when at the very end of a volatile supply chain.
Written by Joe Hester.
