The owner of Britain’s biggest oil refinery has bounced back into the black in a post-pandemic recovery, as the UK’s competition watchdog examines refining profits.
Esso Petroleum Company (EPC), the owner of the Fawley refinery near Southampton, has posted pre-tax profits of £151m for 2021, up from losses of £379m a year earlier.
The Covid outbreak weighed heavily on the oil industry as demand dried up when drivers were forced to stay at home.
However, the government asked the Competition and Markets Authority to examine 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 over the margins made by refineries.
Revenues at EPC, which is ultimately owned by US oil supermajor ExxonMobil, grew from £4.2bn in 2020 to £6.3bn in 2021. In 2019, before the pandemic, EPC notched up pre-tax profits of £149m on turnover of £7.5bn.
Fawley produces about 270,000 barrels of oil a day, providing about 20% of the UK’s total refining capacity.
In its latest accounts, EPC’s directors said: “Turnover was significantly higher due to the economic recovery after the Covid-19 pandemic, driving up both volumes and prices.”
However, it is understood an £800m plan to upgrade Fawley, which was first announced in 2019, has been postponed and remains under review. The work, which was expected to support 1,000 construction jobs, involved increasing the site’s existing output and building a hydrogen plant.
EPC said it had issued £250m in shares to its parent, ExxonMobil UK, “to provide additional liquidity to fund future operations” last year.
The firm also owns Esso’s business distribution fuel to terminals and the 1,200 Esso branded forecourts, of which 197 are company owned. Last year, it cut 220 jobs as part of a “programme of headcount reduction”.
Earlier this year the government introduced the downstream oil resilience bill, aimed at handing ministers powers to ensure continuity of supplies. There have been concerns over the financial health of some of the UK’s six large refineries and knock on effects of Russia’s invasion of Ukraine on global oil markets. Panic buying at the pumps last year also threw a spotlight on the UK’s fuel distribution network.
EPC said its emissions rose from 2.52m tonnes of CO2 equivalent in 2020 to 2.63m in 2021.
Workers at the Fawley plant were force to evacuate last week after an “operational incident”. Few details have been released and a Health and Safety Executive investigation is ongoing. There were no injuries.
Last month ExxonMobil, which is valued at about $470bn, reported a quarterly profit of nearly $20bn, almost matching the earnings of the tech giant Apple.
Separately on Monday, the Opec cartel cuts its forecast for global oil demand this year for the fifth time since April.
It said demand in 2022 would increase by 2.55m barrels per day (bpd), or 2.6%, the Organization of the Petroleum Exporting Countries said in a monthly report, down 100,000 bpd from the previous forecast.
The oil cartel, which angered US president Joe Biden with a recent cut to production targets, said global oil demand could be lower due to high inflation, rising interest rates and China’s strict “zero Covid-19 policy”.
