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Sale of refinery is close to collapse

MurcoONLY one bidder remains as a possible buyer for Murphy Oil’s 130,000 barrels-per-day Milford Haven refinery, but the process is close to collapse, a source familiar with the matter said on Sunday.
The refinery, operated by U.S. oil and gas company Murphy Oil subsidiary Murco, is the latest British plant to face closure as the industry battles lower demand and increased competition from new, modern refineries in the Middle East and Asia.
Officials at Murphy Oil were not immediately available for comment. The source told the Herald a last bidder was still in the running to buy the plant as a going concern although the bid was seen as having little chance of success.
Many analysts believe the plant is likely to be turned into a storage terminal.
The refinery has been up for sale for three years, but Murphy Oil has failed to find a buyer for the plant, which employs nearly 400 in West Wales.
It is believed that at least two companies were offered the plant for free, plus a dowry worth “tens of millions” of pounds.
Fears that the refinery could close follow the battle to save the Grangemouth refinery complex, on the Firth of Forth, Scotland.
A spokesman for the Welsh government said: “We maintain regular contact with Murco and will continue to communicate with them about their operation in Wales.”
Pembrokeshire councillor John Allen-Mirehouse, former cabinet member for regeneration and economic development on Pembrokeshire County Council said: “This is a turbulent time for oil refining and the industry in Pembrokeshire is not exempt from these pressures.
“I would be horrified if the refinery closed. The jobs there are very skilled, well paid and very important to the community.”
The Milford Haven refinery can process up to five million tonnes of crude oil per year. Murco bought 30% of the then Amoco refinery in 1981 and acquired the remaining 70% in December 2007.
It was first reported that the Milford Haven site was threatened last year when Murphy chief executive David Wood said that in the absence of an offer the company was “evaluating the potential conversion of the facility into a storage terminal”.
Since then, the plants economic performance has slipped further as oil margins in the UK have come under pressure.
In its preliminary results, published on October 30 this year, Murphy Oil planed “weaker margins at the Milford Haven refinery” for a loss of $22.7m (£14.23m) in its UK refining and marketing operations.
Production at the plant has fallen slightly in the last year to average 126,303 barrels a day over the last month, down from 132,282 barrels a day for the same period the previous year.
The Murco plant is one of two oil refineries in West Wales alongside the Valero plant at Pembroke which was sold by former owner Chevron in August 2011.
The possibility of a shutdown at the Milford Haven refinery is likely to cause fresh concern in Whitehall and with the Welsh Government.
The Scottish Government was quick to meet union leaders and management at Grangemouth, eventually averting the threat of closure.
Murco could not be contacted for comment.
Experts say that the refining industry, which was built up decades ago to convert North Sea crude into petrol and diesel, is struggling as domestic oil production falls and facilities age.
The number of refineries has dwindled from 18 to seven.
Milford Haven is the only refinery left in Murphy Oil’s empire after the company sold a pair of American sites.
The industry has also been weakened by the rise of diesel-powered cars as many refineries, including Murco’s, mostly produce petrol.
In terms of size and complexity, the most marginal refinery Britain is Milford Haven because of its small capacity.