Growth and Infrastructure Bill

Memorandum submitted by Essar Oil (UK) Ltd (GIB 76)

Introduction

Essar Oil (UK) are the owners of Stanlow Manufacturing Complex which comprises one of the UK’s largest oil refineries and includes an integrated chemical works. UK Refining is facing a number of significant challenges including low margins, costs of meeting EU and UK legislation and an increasing misalignment between refinery products and demand.

The issues facing the refining industry have been demonstrated by the closure of two refineries in 2009 and 2012 and the loss of further UK refining capability poses a serious risk to energy security supply and resilience. It could also jeopardise other industrial sectors depending upon refining feed stocks. These issues have been made clear in reports undertaken for the Department of Energy and Climate Change by Purvin & Gertz and has also been raised in parliament by way of debate on 26 April 2011.

Growth and Infrastructure bill – Clause 22

Clause 22 of the Growth and Infrastructure Bill postpones the rating revaluation due on 1 April 2015 to 1 April 2017. Essar Oil (UK) strongly disagrees with the postponement and submits that Clause 22 should be removed from the bill. The fundamental purpose of a revaluation is to redistribute the rate burden in line with movements in property values. In simple terms, the gainers from a revaluation will be those sectors of the economy with the greatest challenges at the valuation date and the losers, those sectors of the economy performing well. It is inequitable for industry which has faced economic hardship since 2008/9 to continue to subsidise better performing sectors.

UK oil refining has faced significant challenges for a number of years. Given recent plant closures and continuing low margins, the industry was anticipating significant reductions in rateable values and hence, rate liability from 1 April 2015. Instead, the industry will face a further two years paying rates on levels of value from April 2008.

A 2015 revaluation would provide support to sectors of the UK economy facing the greatest economic challenges, such as UK refining. We therefore submit that Clause 22 is deleted.

December 2012

Prepared 10th December 2012