Essar plans capacity cut at Stanlow refinery

India’s Essar Energy PLC is planning to shut down a crude distillation unit at its Stanlow refinery in the UK near Ellesmere Port, Cheshire, in an effort to boost refining margins and ensure the plant’s ongoing viability.

The company will be mothballing its smaller CD3 crude unit by October 2014, which will reduce fuel oil and naphtha production and improve absolute margins, according to Essar’s latest interim management statement, issued on Feb. 18.

With the unit’s shutdown, crude oil processing capacity at the Stanlow refinery will fall to about 195,000 b/d from its current nameplate capacity of 296,000 b/d, with the refinery‘s yield profile expected to become 33% gasoline, 57% kerosene and diesel, and 3% fuel oil, the company said.

The decision to shutter the unit comes as a result of the refinery’s poor financial performance as well as the overall weakness in Europe’s refining industry environment, according to the company.

In addition to closing the unit, the company also is embarking on an estimated $100 million cost-improvement program designed to enable the plant to weather the current period of “exceptionally poor refining margins” in Europe, Essar said.

Currently, the Stanlow refinery is operating at about 70% (207,000 b/d) of its nameplate capacity, according to the company’s website.