The Prax Lindsey oil refinery is to shut down after a search failed to find a buyer for the stricken plant, workers have been told.
In an email seen by the Guardian, staff at the refinery were informed that a sales process that began after the business collapsed into administration last month “has not brought forward an offer … that is both feasible and deliverable”.
“As a result and regrettably, the decision has been made not to order any further crude [oil] to be processed at the refinery,” it said. “The refinery will shortly need to moved into a wind-down phase, while also processing the remainder of the existing crude.”
About 625 staff whose jobs were put at risk by the refinery’s failure were told that it was now “inevitable” that there would be further redundancies on a phased basis, although none would take place before 31 October.
Michael Shanks, the energy minister, said he was “deeply disappointed” at the failure to find a buyer for the plant, the smallest of the UK’s five remaining refineries.
He blamed the parlous financial position that the company had been left in by the husband and wife team who owned it until its collapse: Winston Soosaipillai, better known as Sanjeev Kumar, and his wife, Arani.
The Prax refinery, part of the wider Prax Group owned by the Soosaipillais, fell into administration at the end of June after buckling under the weight of mounting debts, including about £250m owed to HM Revenue and Customs.
The Soosaipillais took £11.5m in pay and dividends out of the group in the years leading up to the refinery’s collapse, the Guardian revealed earlier this month.
The government has previously called for an investigation into the stewardship of the company by the couple, who are rumoured to have left the country.
Sanjeev Kumar Soosaipillai is the subject of legal action from companies in the group, under the control of government-appointed administrators, for “breach of fiduciary duty”.
Some staff had already lost their jobs earlier in the administration process while “special managers” from the consultancy FTI Consulting ran the plant, which accounts for 10% of UK refining capacity, during the search for a buyer.
The search was led by the official receiver, an employee of the Insolvency Service who acts independently of government and is accountable to a court.
In the email to staff, the special managers said the process had led to “various proposals” to buy parts of the Prax Lindsey operation, including storage, distribution and refining assets.
They said talks would continue in the hope of maintaining some operations and jobs at Immingham, the Lincolnshire port where crude deliveries destined for the plant arrive. However, it appears likely that most of the 625 workers at the refinery will be made redundant.
Shanks said: “We are deeply disappointed with the untenable position in which the owners left Prax Lindsey oil refinery.
“As a result, after a thorough process to determine whether a sale was possible, no credible offers have been made to purchase the entire refinery and it will be winding down operations, while the official receiver continues to pursue interest in individual assets.
“Our sympathies are with the workers, their families and the local community. While we continue to strongly encourage the owners to do the decent thing and publicly commit to making a voluntary financial contribution to support workers, all those directly employed at the refinery are guaranteed jobs over the coming months.
“The government will immediately fund a comprehensive training guarantee for these refinery workers to ensure they have the skills they need and are supported to find jobs in the growing clean energy workforce.”
The Soosaipillais built the Prax Group from one petrol station to a diversified oil and gas group with £10bn of revenues.
Insiders have previously told the Guardian that the company was tightly controlled by the Soosaipillais, who pursued a policy of rapid, debt-fuelled expansion that left the company vulnerable to a sudden deterioration in its financial position.
Government ministers had expressed concern about the company’s position in April but the Soosaipillais are understood to have provided reassurances about the company’s position, only to admit weeks later that it was heading for insolvency.