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Grangemouth May Be Sold To China As Owner Seeks Respite From £6.5bn Debt Mountain

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Grangemouth may be sold to China as owner seeks respite from £6.5bn debt mountain

Grangemouth, one of Britain’s largest oil refineries, could be broken up and parts of it sold to a group controlled by the Chinese Government, in a deal that would cut the £6.5 billion debt of Ineos, its embattled owner.

Details of the talks with PetroChina, Asia’s largest energy company, have emerged as Jim Ratcliffe, the chemicals tycoon who is Ineos’s chairman and controlling shareholder, fights to rescue the group’s finances.

Mr Ratcliffe, one of Britain’s richest men, secured a waiver from Ineos’s lenders in late May and has until July 17 to agree a restructuring plan.

The sale of either an overall stake or key parts of the Grangemouth site, which is a vital processing terminal for North Sea crude, is understood to be part of that effort.

A spokesman said that Ineos was in “preliminary talks†with a number of parties about the future of Grangemouth. He added that Ineos remained committed to its long-term future and that the company was likely to maintain a strategic interest.

Sources close to the talks said that one possible scenario would involve PetroChina buying the site’s oil refinery, while Ineos would maintain ownership of the polymer and petrochemical processing plants next to it.

Ineos, which is being advised by Morgan Stanley on the talks, bought Grangemouth from BP in 2005 as part of a wider £5 billion deal. Located on the Firth of Forth, Grangemouth has the capacity to refine more than 220,000 barrels of crude oil every day. It is Scotland’s only refinery and supplies nearly all its petrol and diesel, as well as much of the fuel consumed in Northern England. About 1,400 staff are employed directly by Ineos, plus thousands by other contractors.

In recent months, Chinese oil companies have been taking advantage of depressed valuations to bolster their global presence, although most of the activity so far has been focused on the upstream oil and gas sector.

Two weeks ago, PetroChina tabled a $2.2 billion (£1.3 billion) bid to buy nearly half of Singapore Petroleum Company. It is also close to finalising another refinery investment in Japan, and acquiring part of Grangemouth would give it greater power in global oil trading.

Much of the crude produced from the North Sea is piped direct to Grangemouth for processing and onward export.

Mr Ratcliffe built up Ineos, based in Lyndhurst, Hampshire, in the late 1990s, using high-yield bonds to buy up non-core assets from big chemical and oil companies such as ICI and BP.

By 2007 it had grown into the world’s third-largest chemical company, with turnover of £23 billion and 16,000 staff at 76 manufacturing facilities in 20 countries.

However, the group was hit hard by collapsing demand for chemicals last year as the global recession intensified, creating severe strains in its highly leveraged financial structure.

Last month it reported some signs of a pick-up in trading, but said that conditions remained tough.

A spokesman for PetroChina in Beijing confirmed its interest in the Grangemouth site but said there was no certainty a deal could be reached.

Details of the discussions emerged after Angus MacDonald, a local councillor in the neighbouring town of Falkirk, said that PetroChina was among the companies in talks with the Grangemouth plant.

The site is directly connected to the oil fields of the North Sea via the Forties pipeline, which transports almost half of Britain’s oil production from more than 70 fields.

What amazes me is that an oil refinery can lose money. Just goes to show you how poor the real economy of Britain is.

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Guest sillybear2
What amazes me is that an oil refinery can lose money. Just goes to show you how poor the real economy of Britain is.

It doesn't amaze me, most lose money, the margins are razor thin, in the US there hasn't been a refinery built in over 30 years and countless others have shutdown in that period. The big oil companies dropped their refinery interests years ago because of the huge capital investment required and lousy returns, Grangemouth used to belong to BP for example.

Edited by sillybear2

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Guest anorthosite

The big question is, will the new owners actually manage a worse safety record than the current ones?

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It's not the only one either...

European oil refineries sold and up for sale

FACTBOX-European oil refineries sold and up for sale

LONDON, June 19 (Reuters) - Many European oil and chemical firms have been looking to sell domestic refineries as demand for fuels and petrochemical products have fallen more sharply in Europe than most other areas of the world, hitting profit margins. Most market analysts believe oil demand in Europe has already peaked. Following are the refineries around Europe that have been sold or are currently up for sale:

GRANGEMONTH, UK * Located in Scotland, the plant processes about 200,000 barrels of crude oil per day and supplies fuels to the area. * Current operator British chemicals maker Ineos bought the plant from BP in 2005. * Chinese oil firm PetroChina is in talks for an investment in the Grangemouth refinery. * Grangemonth is a moderately complex refinery as it is equipped with both hydrocraking and catalytic cracking systems, giving it flexibility to produce gasoline and middle distillates, such as diesel, according to market demand. * The plant is connected to the North Sea Forties pipeline, which delivers about 650,000-700,000 bpd of crude oil, roughly half of the UK's daily production.

VLISSINGEN, THE NETHERLANDS * Russia's Lukoil bought a stake in the Vlissingen refinery in the Netherlands from French major Total on Friday, blocking a bid by U.S. refiner Valero. * The refinery's capacity is about 153,000 barrel per day (bpd). * Total will retain a 55 percent stake in the plant. Lukoil has acquired 45 percent, which was previously held by Dow Chemical. * U.S. oil major ConocoPhillips owns 20 percent of Lukoil. * Lukoil is likely to pay about $725 million, matching the price Valero was expected to pay Dow. * Vlissingen is a moderately complex, diesel oriented plant. It is equipped with a hydrocracker, which typically allows a refiner to process relatively heavier, cheaper crude oil such as Russian Urals.

HARBURG, HEIDE, GERMANY * Royal Dutch Shell (Amsterdam: RDSA.AS - news) has been looking to sell its German Hurbarg and Heide refineries. * Hurbarg has a capacity to process 5.2 million tonnes of crude oil a year (roughly 110,000 bpd). It is a moderately complex and its key units are a catalytic cracker for gasoline making and lubricant systems. * Heide can process 4.5 million tonnes a year (93,000 bpd). It is an integrated, petrochemical oriented plant.

TEESSIDE, UK * Swiss-based refiner Petroplus said earlier this year it would sell its Teesside refinery in the UK by the end of June or turn it into a storage site if no buyer can be found. * The 117,000 bpd simple plant stopped production in March 2009, when the company stopped buying crude for the plant. * Petroplus chief executive Thomas O'Malley sold his previous venture U.S. refiner Premcor Inc to Valero in 2005. * Valero said earlier in June it was not interested in buying Petroplus.

LIVORNO, ITALY * Italy's Eni (Milan: ENI.MI - news) said earlier this year it would sell its Livorno refinery by June. * Livorno is an 85,000 bpd simple refinery.

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