Prax Lindsey Oil Refinery: Contingent Liabilities

Michael Shanks Excerpts

Tuesday 1st July 2025 Written Statements

[The Parliamentary Under-Secretary of State for Energy Security and Net Zero (Michael Shanks)]

Today I am notifying the House of the steps taken by the Government with regard to the insolvency of Prax Lindsey oil refinery and related subsidiaries.

We know that this will be incredibly worrying news for workers at the refinery, as well as the wider community in Lincolnshire. The Government stand with the workers, their families and the community at this difficult time. Given the Energy Security and Net Zero Committee’s interest in this, we are updating on the action that the Government are taking.

There have been long-standing issues at the company since it was acquired in 2021. Prax Lindsey oil refinery’s financial reports indicated that it has recorded losses of around £75 million up to the financial year ending February 2024 since its acquisition in 2021.

At the end of April, the Government were informed of ongoing commercial difficulties. We repeatedly asked the company what the financial gap was, to work out whether the Government could help bridge that gap, but the company was unable to share that basic information.

As a result of today’s decision by the company, an official receiver and an administrator have been appointed to take over different parts of the business. The Government will ensure supplies are maintained, protect our energy security, and do everything we can to support workers.

The company has left the Government with very little time to act. The Government are supporting the official receiver to carry out his statutory duties, including managing the situation on the Prax Lindsey site to determine next steps. This will include urgently reporting back on all potential uses of the site, prior to a wind-down of the refinery.

As to the wider business, there are extensive operational and financing interdependencies within the Prax Group which mean that the refinery’s parent company, State Oil Ltd, has also been placed into administration today along with a small number of other group entities.

However, other parts of the group—including the group’s retail business in the UK, which provides oil trucks, logistics and forecourt services at a number of filling stations—have not gone into administration. The retail business is profitable, and is not solely supplied with fuels from the Lindsey refinery. This means that alternative supplies for the group’s retail network can be sourced as necessary and the administrators will seek to do that and trade the business as normal while they look to secure a prompt sale of the retail operation in due course.

The Energy Secretary has written to the Insolvency Service to demand an immediate investigation into the conduct of the directors and the circumstances surrounding this insolvency.

The Government’s immediate priority is to ensure that affected workers are supported through this difficult time. We will urgently work with the company and trade unions to explore what further support can be offered for workers.

I have laid a departmental minute today notifying the House of two contingent liabilities associated with the Government’s intervention. I regret that, due to compressed timings and the rapid response the Government have had to prepare, I have not been able to follow the usual notice period of 14 parliamentary sitting days. These liabilities relate to:

Legal indemnity

A legal indemnity has been offered to the official receiver to protect it against financial loss or legal claims incurred in the course of carrying out its statutory functions. The indemnity is a standard mechanism in high-risk or complex insolvencies where appointees are expected to act in the national interest without undue risk to the appointees. Crystallisation is expected to be limited.

Operating cost support

The Government will provide short-term funding to cover the essential operating costs of the refinery. This is required to maintain safe site operations to ensure our energy security during the initial phase of liquidation and to facilitate a controlled shut down or potential sale as a going concern. The funding acts as working capital to ensure the secure transition of the site as well as allowing the fuel sector enough time to adapt supply chains and commercial arrangements so that fuel remains available to end users. The final operating cost support will depend on market conditions and the strategy adopted by the official receiver, and this will be subject to close scrutiny and governance by the Government and the insolvency office holders.

Together, these contingent liabilities are necessary to provide the official receiver and special manager with the necessary tools to fulfil their duties in a beneficial way for creditors and taxpayers. If the liability is called, provision for any payment will be sought through the normal supply procedure. The Treasury has approved the proposal in principle.

I will update Parliament on any developments in this contingent liability.

[HCWS761]