Today I received two discouraging news items ― both on the same general theme, and both from the journal Hydrocarbon Processing. The first item stated that UK’s Lindsey oil refinery is insolvent, and that 420 jobs at risk. (The refinery is located in North Lincolnshire, and is owned and operated by the Prax Group.) The reason for the closure is that it was ‘on the verge of insolvency’.
The second news item was SABIC announces closure of Olefins 6 facility in Teesside, UK. In this case, 330 jobs are at risk, ‘with the firm saying it would be economically challenging to complete a conversion and then operate the cracker’. (The links to both articles did not work at the time of writing.)
So, we have two important industrial facilities closing because they are not profitable. If these were isolated cases then there would not be too great a cause for concern. But the decline is broad-based; 20 years ago the UK had over a dozen refineries, now only six remain. Capacity has declined from 1.8 to less than 1.0 million barrels per day.
Various factors contribute to this decline. These include:
Aging infrastructure that cannot compete with newer mega-refineries in Asia and the Middle East.
High energy, labor and environmental compliance costs.
Changes in demand.
Carbon pricing and ESG pressures.
Unfortunately, these problems are not confined to the UK. Western Europe and Japan face similar issues. The U.S. remains more competitive, though it shares some of these difficulties. China is still growing, but may face headwinds in the next decade.
Of the causes just listed, I suggest that the one that is fundamental is the cost of energy. This is a topic that we will explore in future posts. If energy costs are indeed so fundamental, then there are no easy solutions to the dilemmas we face. (Anecdotally, I hear that the cost of industrial energy in the UK is the highest in the world among major economies.)
The process engineering and process safety communities face structural challenges.
Trevor Kletz is well known for his comment that, ‘If a tank is not there, it cannot leak’. I have adapted his insight to say, ‘If a man’s not there he can’t be killed.’ We can apply the same principle here,
If a refinery’s not there, then there is no need for process safety management.
