The fate of the Coryton refinery in Essex, about 25 miles east of London, became cloudier after the British Department for Energy and Climate Change said Friday it wouldn't approach the European Commission to seek its blessing in offering a subsidy to keep the operation going.
The refinery's former owner, Switzerland's Petroplus, became insolvent in January, placing the fate of its plant and its 850 jobs at risk. The facility supplies about 20 percent of the fuel used in London and southeastern England.
Unions representing Coryton workers had urged the government to step in with funding while a new owner could be found but DECC issued a statement last week saying a subsidy wouldn't be feasible due to overcapacity in the refining industry and declining demand for gasoline, the BBC reported.
"If government did step in to help Coryton, this would be a short-term fix, and it could potentially lead to job losses at other refineries who would be at an unfair disadvantage to Coryton," a department spokesman said. "This was a very difficult decision and it is particularly regrettable that people may lose their jobs.
"The closure of Coryton as a refinery should not have any impact on supply of fuel to London and the southeast. There are many other supply points and operational refineries which can be used."
That brought an angry reaction from unions at the plant, who have staged protests this month demanding the government preserve the refinery as an integral part of Britain's energy infrastructure that puts $150 million into the local economy.
Len McCluskey, secretary-general of the British trade union UNITE, said DECC's decision not to invest in the refinery was hypocritical after Chancellor George Osborne's announcement Thursday of a scheme to provide low-cost funding to Britain's largest banks in a bid to kick-start lending.
"Last night, the Chancellor pledged to pump in at least ($220 billion) into the banking system to boost lending -- which bankers should be doing anyway as that's their job -- in an attempt to build a financial firewall against the situation in Greece.
"Yet a similar request from Unite for state aid in the short-term to tide over Coryton until a viable buyer is found to take over the oil refinery is dismissed by ministers out of hand. This is simply not good enough."
Analysts said layoffs at the plant could begin as soon as this week in Essex, with more job losses possible at an oil storage site at Teesside in northeastern England and a research and development site at Swansea in Wales.
Meanwhile, a former Russian energy minister is bidding to keep the refinery open.
Igor Yusufov, energy minister in Vladimir Putin's first term as Russian president, has emerged as sole bidder for the bankrupt refinery, The Financial Times reported Friday.
PriceWaterhouseCoopers, which is administering the bankrupt refinery, declined to comment on the report.
Labor Party Member of Parliament Richard Howitt told the newspaper Yusufov was a genuine bidder.
"I am aware of his bid, and have been assisting it," he said. "It did stall for awhile, but I put some efforts in trying to encourage the talks to get going again. The talks, certainly, as of [Thursday], are proceeding."