Loss-making refinery faces uncertain future

The Whitegate oil refinery, which its parent company has confirmed may yet be sold, is significantly loss-making, according to its most recent annual accounts.

Loss-making refinery faces uncertain future

Texas-based Phillips 66, which owns the refinery in Co Cork, confirmed to the Irish Examiner earlier this week that it is still considering selling the country’s only refinery, despite having ended its marketing of the troubled asset last year amid weak demand.

Accounts filed for the refinery with the Companies Registration Office (CRO) show it made a pre-tax loss of $53.37m (€48.47m) in 2013.

The directors of the company attributed the loss to a difficult economic climate and competitive environment in the European refining industry which they predicted was likely to persist.

The impact of reduced demand allied with increased competition from the US, Middle East, and Russia contributed to lower margins for the refinery.

The loss came about as turnover fell by 5% and was in contrast to the previous year in which the refinery turned a $9.18m profit.

The news that Phillips 66 is still considering selling the refinery spurred local political reaction with Independent councillor Noel Collins calling for a taskforce to be set up to ensure its future.

The Whitegate facility is seen as strategically important to the country in terms of securing its fuel supply and is critical to the commercial success of the Port of Cork.

In 2014, Whitegate accounted for 55% of freight and 28% of the port’s income.

The port enjoyed another profitable year in 2013 with pre-tax profits climbing from €1.37m to €1.74m.

Turnover in 2013 totalled €23.3m of which the refinery accounted for around €6.5m.

Speaking to the Irish Examiner, Port of Cork chairman John Mullins sought to downplay concerns of the potential impact of any change of ownership.

“I think it’s been on and off the market for many years,” said Mr Mullins. “Our view on it from a port point of view... is that Whitegate supplies 30% of oil products right around the region and that’s not going to change overnight, no matter what happens to the ownership of Phillips 66.”

The former Bord Gáis chief executive added that “whatever happens” it is important that the refinery stays open and continues to function given its importance to the oil value chain in the south of the country.

Phillips 66 has a contractual obligation to operate the refinery, which employs 157 staff and a further 130 contractors, until July 2016 but is non-committal on its future as a refinery after that.

The company says it continues “to evaluate all options including sale and/or possible conversion to a product import terminal to supply Ireland’s needs”.

The Irish Petroleum Industry Association (IPIA) says it is broadly in favour of the Government’s preference to maintain refinery capacity in the country but added that their support was not without condition.

“About 60% of Ireland’s energy requirement is from oil,” said a spokesperson for the IPIA.

“The Irish Petroleum Industry Association works with the State to protect security of supply of oil. We are therefore broadly supportive of the Government’s preference in favour of maintaining refinery capacity in Ireland as it would give Ireland extra protection in some circumstances. It does of course depend on how we do this and what the cost is.”

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