London-listed Essar Energy plc has turned around UK's second largest refinery Stanlow within a year of taking it over from Royal Dutch Shell, posting a pre-tax profit of $197 million in six month to September 30.
"Current price EBITDA at Stanlow rose to $197.2 million, compared with $22.2 million in the first eight months of ownership to March 2012," the company said announcing its second quarter earnings.
Shell divested its refinery assets for not being profitable.
Stanlow had been run by its previous owner (Shell) as a cost centre, and had been for sale for some time when Essar purchased it, by which time employees had concerns for their future. Essar Energy acquired the refinery for $350 million from Shell on July 31, 2011.
Gross refinery margins rose to average $8.03 per barrel, compared with $3.06 a barrel in the first eight months to March 2012.
"Of this margin uplift, $1 per barrel is due to internal initiatives and investments as part of the '100 day plan' put in place following acquisition by Essar for $350 million in July 2011," the company said in a statement.
Essar said initiatives and investments at Stanlow aimed at improving margins by a total $2-$3 per barrel by 2014-15 (including the $1/barrel just achieved) are continuing ¿ including installation of natural gas to fuel the six boilers on site, which will be completed in the coming weeks.
Stanlow is the second largest UK refinery, with nameplate capacity of 2,96,000 barrels per day, and an above average Nelson complexity of 8.2.
However, current optimised configuration gives Stanlow a 220,000 bpd operating capacity with an effective complexity above 10. This produces an above average proportion of middle distillates at 55%,--principally diesel and jet fuel ¿ of which there is a significant and growing deficit in the UK and Europe as dieselisation of vehicles continues and weaker refineries shut.
Stanlow produces 15% of UK transport fuels.
The company is installing natural gas to fuel the six boilers providing steam to drive the refinery.
Also, it has started to use 11 lower cost crudes from various geographies like Africa, Canada to optimise efficiencies.
Besides, it will close lubricants production once remaining customer obligations have been met.
Essar expect material benefits from the closure as lubricants make up only 1-2 per cent of Stanlow¿s output but dictate the choice of 25 per cent of the overall crude intake.
