Essar takes over landmark site and offers investment pledge, as Alistair Houghton reports

THEY didn’t play OMD’s synthpop epic Stanlow when, on the stroke of midnight, the Shell flag was lowered on the eponymous Cheshire refinery and replaced with the Essar banner.

But those workers present to mark the start of a new era at the landmark refinery will surely hope the song’s lyric remains true – “Eternally,” sings Andy McCluskey, “this field remains Stanlow”.

On Monday, Stanlow was officially taken over by India-focused group Essar Energy.

Essar bought the 1,350-hectare site from Royal Dutch Shell, in a deal whose total value comes to more than $1bn.

Its first instalment, of £108m, has now been paid, while a second £108m instalment is due in a year’s time.

Essar has also paid Shell £564m for the crude oil and fuels stored on the site.

Now London-listed Essar is promising to upgrade the site, with a four-year investment plan worth some £250m.

The site is currently running at 70% capacity, but Essar hopes to boost that to almost full capacity within months.

The takeover was a prolonged process, with talks beginning in 2009.

But, with the uncertainty over, general manager Frank Willsdon says Stanlow’s staff are optimistic about what the future holds.

He said: “For this site, it’s the first time for quite a long time that we’ve heard about investment and growth opportunities and looking to maximise the capacity of the asset here.

“From a site point of view, and from the employees’ point of view, it’s a very positive message.

“We’re looking forward to growth and potential investment on the site, which is different from our recent experience here.”

He added: “We want to maintain a long-term future both for the employees here, and for the people who might join in the future.”

Just like a 1980s pop video, the Stanlow takeover was well choreographed. By the time visitors arrived on Monday morning, all signs around the complex had been changed to Essar, while a giant Essar banner had been plastered on the company’s headquarters building.

Staff had, said Mr Willsdon, “worked round the clock” to get the site ready for its new dawn.

The only signs of its former owner were red and yellow stripes high up on some of the refinery towers – and those stripes, too, will soon disappear.

Mr Willsdon said: “When our employees came in today, they’ve seen and felt a different-looking site and started to feel part of a new company.

“We’re entering the new world in the right spirit and with some momentum.”

Senior managers from Essar Energy, and its parent industrial conglomerate, Essar Group, were visiting Stanlow to mark the occasion.

Essar Energy’s chief executive, Naresh Nayyar, confirmed that Essar planned to invest $100m a year in “health, safety and environment” work at the plant.

He said that while Essar’s plans for Stanlow were still at an early stage, there were some “quick wins” it planned to focus on to improve the site’s performance.

That could include the site producing a wider range of products – “optimising the crude mix”, as Mr Nayyar puts it – as well as improving its operational efficiency.

He said: “We will work with the local management to see how we can improve the operational efficiency of the site, even if it requires some investment.”

Stanlow is a regional icon, as shown by the fact that Wirral natives OMD chose to title a song after it on their 1980 album, Organisation.

It is impressive by day, but by night it becomes a shimmering sci-fi city of flashing lights and flares, visible from miles around.

But Stanlow is of more than regional importance. The site is the UK’s second-biggest refinery and produces 15% of the UK’s petrol supply.

It produces products from jet fuel to petrol, and from bitumen to LPG.

So it’s easy to see why it would be such an important target for Essar Energy, which is looking to grow into markets beyond its home country. Stanlow provides it with a foothold in the European market.

Mr Nayyar said there were three key reasons why Essar bought Stanlow – the size and quality of the refinery, the fact that it can be used to import oil from Essar’s Vadinar refinery, and the fact that it was for sale at an attractive price.

He said: “The consideration which we have come to with Shell we believe is very attractive compared to similar transactions which have taken place in this part of the world.”

Vadinar currently produces 300,000 barrels a day, though that will go up to 375,000 barrels a day later this year. Once expansion work is completed next year, it will produce 400,000 barrels day.

Essar also owns a 50% stake in the Kenya Petroleum Refineries facility in Mombasa, Kenya, which produces 80,000 barrels a day.

Stanlow adds up to 296,000 barrels a day to Essar’s output. Mr Nayyar said: “It’s a quantum jump in terms of the whole refinery capacity of Essar Energy.”

He added: “Essar Energy has a stated vision that we want to have operating capacity of 1m barrels per day. The Stanlow acquisition is a big step towards that direction.

“With that capacity and this acquisition, and with the completion of our expanded refinery at Vadinar (in India), we’ll come to nearly 800,000 barrels per day.”

Mr Nayyar said economic conditions would determine when Essar will start importing oil to Stanlow from Vadinar, though he said imports could start in the next Indian monsoon season when domestic demand falls.

Mr Willsdon hopes staff from the “mature” refinery at Stanlow will be able to learn from Essar’s newer refinery at Vadinar, while Indian staff could also benefit from sharing in Stanlow’s experience.

In its heyday, Stanlow employed thousands. Today it employs around 950 people, with another 500 to 1,000 contractors on site at any one time.

From the roof of the administration block, at the heart of the complex, a web of pipelines, towers and chimneys stretches for hundreds of metres in each direction. Stanlow is, the proud guide told watching photographers, “the size of 300 full-size football pitches”.

The site is a huge investment for Essar – and it comes at a time when other companies are reducing their capacity.

Total last year announced it was closing its refinery in Dunkirk, France, while Petroplus ended its refining operations in Teesside in 2009.

But Mr Nayyar and the Essar team are clearly optimistic about the refinery’s prospects – particularly once the economy picks up again.

Mr Nayyar said Essar planned ultimately to use Stanlow as a beachhead to launch into the continental European market.

He added: “But our focus is that we need to maximise our sales to the domestic market.”

With Essar’s ambitious plans for its newly-acquired Cheshire site, it looks like Stanlow will be a feature of the Mersey landscape – and an inspiration to North West musicians – for many years to come.