The owner of Britain’s biggest oil refinery has bounced back in the dark in a post-pandemic recovery as Britain’s competition watchdog examines refining profits.
Esso Petroleum Company (EPC), owner of the Fawley refinery near Southampton, posted pre-tax profits of £151million for 2021, compared with losses of £379million a year earlier.
The Covid outbreak has taken a heavy toll on the oil industry as demand dried up as drivers were forced to stay home.
However, the government has asked the Competition and Markets Authority to review the fuel sector amid concerns over soaring prices at the pump earlier this year, caused in part by the war in Ukraine. . The watchdog then expressed concerns on the margins made by the refineries.
Revenue from EPC, which ultimately belongs to the American oil supermajor ExxonMobilrose from £4.2 billion in 2020 to £6.3 billion in 2021. In 2019, pre-pandemic, EPC made a pre-tax profit of £149 million on revenue of £7.5 billion.
Fawley produces around 270,000 barrels of oil a day, supplying around 20% of the UK’s total refining capacity.
In its latest accounts, EPC directors said: “Revenue was significantly higher due to the economic recovery from the Covid-19 pandemic, driving up both volumes and prices.”
However, it is understood that an £800m plan to upgrade Fawley, which was first announced in 2019, has been postponed and remains under consideration. The work, which was to support 1,000 construction jobs, involved increasing the site’s existing production and building a hydrogen plant.
EPC said it issued £250 million worth of shares to its parent company, ExxonMobil UK, “to provide additional cash to fund future operations” last year.
The company also owns Esso’s fuel distribution business at the terminals and the 1,200 Esso-branded forecourts, 197 of which are company-owned. Last year it cut 220 jobs as part of a “workforce reduction programme”.
Earlier this year, the government introduced the Downstream Oil Resilience Bill, aimed at giving ministers the power to ensure continuity of supply. There have been concerns over the financial health of some of the UK’s big six refineries and hitting on the effects of Russia’s invasion of Ukraine on world oil markets. Panic buying at the pump last year also shed light on the UK’s fuel distribution network.
EPC said its emissions fell from 2.52 million tonnes of CO2 equivalent in 2020 to 2.63m in 2021.
Workers at the Fawley factory were forced to evacuate last week after an “operational incident”. Few details have been released and an investigation by health and safety management is ongoing. There are no casualties.
Last month ExxonMobilwhich is valued at around $470 billion, reported quarterly profit of nearly $20 billionnearly matching the revenue of tech giant Apple.
Separately on Monday, the OPEC cartel lowered its forecast for global oil demand this year for the fifth time since April.
He said demand in 2022 would increase by 2.55 million barrels per day (bpd), or 2.6%, the Organization of the Petroleum Exporting Countries said in a monthly report, down 100,000 bpd from compared to previous forecasts.
The oil cartel, which angered US President Joe Biden with a recent reduction in production targets, said global oil demand could be weaker due to high inflation, rising interest rates and China’s strict ‘zero Covid-19 policy’ .