UK faces surge in imports amid new refinery closure risk

The UK could face another 30,000 b/d jump in its diesel deficit as authorities prepare to wind down another imperiled oil refinery, Lindsey, based on figures from S&P Global Commodity Insights.

England's 108,000 b/d Lindsey refinery, owned by Prax Group, filed for insolvency on June 29, putting it at high risk of becoming the latest casualty of an increasingly strained European refining sector.

The plant has continued operating "as usual," as liquidation authorities prepare to wind down activities at the site, a spokesperson for the Department for Energy Security and Net Zero said July 3.

Prior to sunsetting refining activities, authorities are "urgently reporting all potential uses," for the plant, the spokesperson said. However, the business has left the government with "very little time to act," she told Platts.

Trade sources said that the refinery had preemptively suspended fuel loadings, risking an immediate vacuum in the UK fuel market.

In the first quarter of 2025, the UK already imported 59% of its diesel and 88% of its jet fuel, according to government figures, while it has remained a net gasoline exporter.

Prax was not available for comment.

According to analysis by Commodity Insights, the refinery has the capacity to produce some 30,000 b/d of diesel and 50,000 b/d of gasoline, making it a small but important supply source.

Responding to the news, market sources said that diesel traders had flocked to the import market to secure cargoes. In a sign of potential near-term tightness, backwardation in front-month ICE low sulfur gasoil futures jumped to $4.50 on July 2, a 16-month high.

Liquidation of Prax's Lindsey Refining business also leaves its long-term crude supply arrangements with Glencore in limbo, after it inked a new deal with the commodities trader in July 2024.

Refining fractures

The collapse of the Lindsey business will be a test for UK energy and industrial policies as more domestic refiners have struggled to stay competitive.

A potential refinery closure would be the country's second in three months and would leave it with four operating plants: Fawley, Pembroke, Humber and Stanlow.

Faced with rising environmental costs and import pressure from large-scale, low-cost competitors, smaller refiners like Lindsey have consistently warned that their margins could become too thin to operate in the coming years.

In April, Scotland's 150,000 b/d Grangemouth refinery was converted into an import terminal, taking UK oil product imports 4% higher year over year in Q1 2025.

Previously, former Lindsey refinery owner TotalEnergies had halved the capacity of the refinery in 2016, before selling it to Prax in 2021.

To address high energy costs for industrial players, the UK rolled out a "Supercharger" scheme in April to help subsidize electricity costs, but lobby groups have warned that refineries, which mostly supply their own power, are unlikely to feel the benefit.

Refined products have so far been left absent from a Carbon Border Adjustment Mechanism designed to bridge the gap in production costs with foreign competitors, where refiners are often free from emissions charges.

According to financial reporting by Prax, the Lindsey site recorded losses of around GBP75 million ($100 million) from the date it was acquired from TotalEnergies in 2021 to February 2024.

Petroineos, owner of the now-shuttered Grangemouth refinery, previously disclosed losses of over $775 billion since 2011.

Government support prospects

In 2014, the government granted a Petroineos GBP230 million loan to keep the refinery operating. But more recently, it has avoided costly bailouts for the downstream sector.

Ahead of the Grangemouth refinery closure, government officials said that the 100-year-old refinery was structurally unprofitable and not viable to salvage, focusing instead on clean energy opportunities.

Since the refinery's closure, the government has set out plans to develop Grangemouth into a "flourishing low carbon hub", backing potential plans for plastics recycling and biorefining projects. The UK and Scottish governments have set aside GBP225 million ($290 million) in joint funding for the site, but have yet to finalize plans.

Other recently shuttered UK refineries, including Coryton and Milford Haven, have previously been converted into storage infrastructure.

According to UK government data, the country made its largest oil stock build in over three years in Q1 2025, though rising net import demand means stocks will go less far.

Data from the International Energy Agency shows that the country had oil stocks to cover 127 days of its net oil and products imports in March, down from 152 the previous year.

Prax's parent company State Oil Limited and its Lindsey oil refinery division have both filed for insolvency, said Teneo, a financial advisory company engaged in the liquidation procedures. The affiliated retail operations, logistics operator and upstream business are unaffected, Teneo said.