Coryton refinery becomes latest casualty of Europe industry doldrums
By KONSTANTIN ROZHNOV
CORRINGHAM, England -- Like steel-makers and shipbuilders before them, the aging oil refineries that furnished Europe's fuels are dying off as demand shifts to suppliers elsewhere, depriving communities of jobs that will be difficult to replace.
The Coryton oil refinery, perched on the mouth of the Thames River 40 miles east of London, just became the latest casualty.
The facility was one of the largest and most modern in Europe, supplying some 10% of the UK’s fuel market and a primary source of jobs for the local community.
This summer it is shutting down, the latest industrial victim of a prolonged European economic slump and far-off competition in the Middle East and Asia, enjoying closer access to burgeoning emerging markets.
The site is set to live on in radically changed form as an oil distribution terminal employing no more than 50 permanent staff, a tenth of the current staff of 500 - which doesn't include an equal amount of contractors.
A first batch of 180 dismissal notices were handed out at the end of June, with more to follow.
Waiting for his notice is Scott Davey, a control-room operator who has worked here for 20 years and is now contemplating relocating to Asia, where his expertise is in demand, while leaving his wife and two children in England.
"There are virtually no jobs for us in the UK and almost none in Europe," says Mr. Davey, who is 41 years old.
Coryton is the eighth refinery to close in Europe and the second in the UK since the start of the economic crisis in 2008, out of around 100 in the region. The downturn and the euro zone's sovereign debt problems have sharply cut the continent's demand for fuel such as diesel and gasoline.
Furthermore, most European refineries were built to maximize the production of gasoline, but the fuel isn't so sought-after in Europe anymore due to people driving less and increasingly switching to diesel, which is generally more economical.
The fall in European demand coincided with the refining boom in Asia and the Middle East and the global shift in demand to diesel, leaving European refiners without access to many export markets.
Meanwhile, companies in Asia and the Middle East enjoy strong demand for the fuel they produce, have money for further upgrades and capacity expansion and can still make a profit when crude prices are high.
More bad news for European refiners has come from the United States, the world's largest oil consumer.
The country's transformation into a net exporter of refined products and declining US gasoline demand have diminished a key market where European refiners once shipped much of their surplus gasoline.
As a result, a glut of gasoline hit European refiners' profits hard, shedding more than one million barrels a day of the continent's refining capacity, an equivalent of 8% of the capacity that was on line in Europe in the first quarter this year.
European refiners themselves and analysts believe that at least another one million barrels a day of refining capacity will need to shut down for the remaining refiners to survive.
But they are reluctant to provide any names of companies they see as vulnerable, as the industry has already shown itself to be full of surprises.
Problems in the European economy were a key reason for the failure of Swiss-based Petroplus Holdings AG, the Swiss company that owned the refinery.
It filed for insolvency earlier this year as its hopes for higher profit margins failed to materialize because of the reduced European demand for refined products and a lack of credit.
When it happened, almost every industry expert was saying that if any of Petroplus's five refineries survives, it will be Coryton.
Yet, three of the refineries have been sold to unlikely buyers - commodity trading houses - and a private Iranian company is bidding for a fourth one, leaving Coryton the only Petroplus plant to close.
But to predict which countries are likely to see further closures is more straightforward, says Roy Jordan, downstream consultant at Facts Global Energy.
"The UK, France, Italy and likely Germany are pretty much vulnerable," he says.
The slow death of many European oil refineries has added to the lengthening lists of the region's industrial employers that are folding in the face of burgeoning overseas competitors, gutting local economies built around the plant.
The biggest problem workers face is that the chances of finding a new job in the area are slim.
"The only real option unfortunately would be to relocate, even to another part of the world," says Russell Jackson, 54-year-old chairman of the Unite labor union's Coryton branch and a process controller who has worked at the plant for 29 years.
The UK government said it looked into providing state aid to the refinery, but decided that supporting the plant with public money would be unsustainable, given the state of the European refining sector.
"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," Energy Minister Charles Hendry said in June.
Local government authority Thurrock Council estimates the refinery's closure will cost the local and national economies more than GBP100 million each year, including around GBP30 million in wages, almost as much in contractor costs and the rest in locally sourced materials, services and supplies.
"It has been very quiet for the past couple of weeks as [Coryton] contractors are gone and locals aren't spending at the moment," says Nuala Keren, licensee and manager of The New Pompadour, a pub that used to be packed with non-local contractors on weekdays.
Belson and Sons Optometrists is one of many shops in the area which has had direct links with the refinery. It has supplied safety spectacles for refinery workers and contractors, as well as prescription glasses for them and their families, says its manager Karen Wide.
Now she says she is worried for her job, as the business could suffer if many customers leave the area because of the Coryton closure.
"Corringham could turn into a ghost town; crime will rise," says Ms. Wide.
Most of those losing jobs at Coryton just can't afford to take a sharp pay cut: at least 85% of houses are mortgaged in the Corringham area, according to Connollys estate agents. Local residents fear that it could cause property prices to plummet.
"The market will most probably be flooded with property, including the rental market," says Cheryl Bemister, letting administrator at Connollys.
Some Coryton workers put their homes up for sale before redundancies were announced, as it may take months to sell them, says 53-year-old Tony Clements, who has worked at the plant for 23 years.
Mr. Clements is lucky compared to many other fellow workers - he doesn't have a mortgage to repay and is planning to retire and live on the pension he has already earned.
For local businesses, the future is uncertain at best.
Paulette Glover, who owns a bakery, said when asked about her expectations: "Come and see me in a year."
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