Petroplus shuts three oil refineries

Petroplus is to close three of its five oil refineries because it has run out of money for crude supplies since bankers froze its credit lines abruptly this week. Talks with the bankers have been "open and constructive" and will continue in the coming days, the financially troubled company said in a statement about the closures, two of which will begin over the coming weekend.
"In the meantime, the company will start temporary economic shutdowns of the Petit Couronne (France), Antwerp (Belgium) and Cressier (Switzerland) refineries in January 2012 given limited credit availability and the economic climate in Europe."
A victim of oversupply in European refining and of an investment strategy under former boss Thomas O'Malley that fell foul of an industry downturn, Petroplus and European government officials have been locked in talks with the 13 banks that froze a $1 billion facility it needed to buy crude oil.
Friday's announcement follows days of talks among bankers, government officials and the company aimed at keeping fuel flowing from Europe's biggest independent refiner. A source close to the situation said a "provisional financing agreement" had been found to keep the talks going after intensive talks involving banks, the company and local governments.
And a Swiss local government official said he was urging the banking consortium to reconsider, although he did not confirm any breakthrough. "I called yesterday to both Swiss banks, UBS and Credit Suisse, to insist on the local and strategic importance of the Cressier plant," said Thierry Grosjean, Economy Minister at the Swiss canton of Neuchatel, home to Petroplus's Cressier refinery.
Traders and analysts expect a large customer, supplier or banker could step in to keep plants running at some point. But despite efforts so far, workers at the company's French and Belgian refineries were already preparing shutdowns on Sunday and Monday, according to officials and trade unions.
"There is no more crude coming in so the plant cannot work any more so we need to start shutting down all the plant's units on Monday, but this is a technical shutdown," said a spokeswoman for Petroplus in France. "The shutdown will take about a week." The Cressier plant has enought crude to last between 15 and 20 days, according to the head of economic services in the canton of Neuchatel, Patrick Cossettini. Traders said that of Petroplus's five plants, the UK plant in Coryton might be the last to stop given its superior tank holding capacity.
It remained unclear why the banks cut funding so abruptly just two months after allowing the troubled company to breach debt covenants without penalty. Analysts and traders believe a worsening outlook for the industry and pressure from governments on banks to boost bank capital might be among the reasons for the unusual move, but one loan industry player thought otherwise.