The government is funding the official receiver to ensure the safe operation of an oil refinery after its owner went into administration, a minister has said.

Prax Lindsey Oil Refinery Limited, which owns the plant in Immingham, North East Lincolnshire, filed for insolvency on Sunday, putting hundreds of jobs at risk.

There are 420 employees at the refinery, though Unite the Union said 1,000 jobs could be affected when taking into account contractors and the supply chain.

Speaking in the Commons, Michael Shanks, the energy minister, said the owner of Prax Group should “put his hands in his pockets and deliver proper compensation for the workers”.

Workers had been “badly let down” and the government was demanding “an immediate investigation into the conduct of the directors and the circumstances surrounding this insolvency”, he added.

Prax Group, which is led by chairman and chief executive Sanjeev Kumar Soosaipillai, purchased Lindsey Oil Refinery from French company Total in 2021.

The Department for Energy Security said the company’s financial reports indicated the plant had recorded losses of about £75m between the takeover in 2021 and February 2024.

Shanks said: “The Secretary of State (Ed Miliband) was reassured by the company that there was no immediate closure risk to the refinery. A week ago, the business changed their position and said they feared it could no longer be a going concern.

“We repeatedly asked them at official and ministerial level what the financial gap was, to work out whether the government could help bridge that gap, but the company were unable to share that basic information.”

The company had left the government with very little time to act, he added.

“The government will ensure supplies are maintained, protect our energy security, and do everything we can to support workers and the local community, including engaging with trade unions and industry bodies,” Shanks said.

“The government believes that the business’s leadership have a responsibility to the workers and the local community.

“We call on them to do the right thing and support the workers through this difficult period.”

Shanks said the government was actively looking for a buyer for the business and, if that failed, other potential uses for the site.

Sharon Graham, Unite’s general secretary, said: “The Lindsey oil refinery is strategically important and the government must intervene immediately to protect workers and fuel supplies.

“The government needs a short-term strategy to keep Lindsey operating and a sustainable long-term plan to fully protect all oil and gas workers.”

Mick Simpson, a regional officer for Unite, said members were “extremely worried about their immediate future”.

“It’s one of the largest employers in the Immingham area. So you know, the immediate damage would be to people’s welfare. You’d have an awful lot of people.

“I’m hoping that action can be taken to safeguard jobs and protect this industry,” he said.

Mr Simpson drew parallels with the British Steel plant in Scunthorpe, where the government took control earlier this year in order to safeguard its future.

He said he hoped “similar measures” could be put in place “to support oil and gas workers”.

The Insolvency Service announced FTI Consulting had been appointed as “special managers” to assist the official receiver during the liquidation process.

It confirmed there were 420 employees at the refinery but would not comment further.

Teneo has been appointed as administrator for Prax Group’s parent company, State Oil, which employs 182 staff and owns 190 petrol stations in the UK, along with 325 others in Europe.

Clare Boardman, from Teneo, said administrators would be “considering all options for the group, including the prospect of a sale for the group’s upstream business and retail operations in the UK and Europe, all of which remain outside of insolvency”.

According to the government, Lindsey is the smallest of the UK’s oil refineries producing fuel. It is located next to the Phillips 66 Humber refinery, which is the dominant fuel supplier in the region and continues to operate at profit.