August 11, 2011 at 1:27 pm #2164
UPDATE 2-Hestya Energy to buy, restart German refinery
Wed Aug 10, 2011 1:04pm GMT
* Plant was idle for nearly 2 years
* Follows string of refinery sales in Europe
* Europe’s refining margins better in August (Adds detail, factbox, graphic)
By Michael Hogan and Emma Farge
HAMBURG/LONDON, Aug 10, 2011 (Reuters) – Private Dutch company Hestya Energy BV said on Wednesday it plans to buy the German Wilhelmshaven oil refinery from U.S. group ConocoPhillips and then restart it, adding to signs that investor interest in the crippled European refining sector is not dead.
The north German plant has been mothballed for most of the past two years due to an extended bout of poor margins and damage caused by a fire in May 2010.
ConocoPhillips has been trying to either sell the 260,000 barrels-a-day refinery or turn it into an oil distribution terminal as part of its strategy of cutting downstream operations as weak fuel demand has pummelled European profit margins.
No price for the deal was given. A Hestya Energy spokesman said it was planned to resume refinery operations “as soon as possible” at the site but gave no date.
The transaction is expected to close later this year.
The planned sale of the refinery and its terminal follows several prominent transactions in the industry this summer including oil major Chevron Corp’s sale of its UK Pembroke plant to U.S. refiner Valero and Shell’s (RDSa.L: Quote) sale of UK Stanlow complex to India’s Essar.
Funding for the transaction is being provided by private equity firm Riverstone Holdings — of which former BP chief executive Lord Browne is a partner — and private investment company Atlas Invest. Private investor Klesch agreed to buy Shell’s German Heide refinery in similar move last year.
Analysts and oil traders met the news of the sale and imminent restart with surprise as the plant had been seen as a likely candidate for permanent closure given its limited complexity.
“I’ve just fallen off my chair. It’s against a background of weak demand and overcapacity and it doesn’t appear to make sense to restart it. It’s a rather good thing for Conoco,” said Roy Jordan, research associate at FACTS Global Energy (FGE).
As a simple plant, Wilhelmshaven has a relatively high yield of fuel oil — a product which is generally made in Europe at a loss. Conoco cancelled a plan to upgrade the plant in July last year in a move which would have increased the output of higher value products such as the motor fuel diesel.
“It’s hard to see how they could make Wilhelmshaven sufficiently profitable when a healthy oil major with huge refining experience worldwide could not,” said Robert Beaman, oil and gas analyst at Business Monitor International.
Still, better refining margins this summer may have increased the plant’s appeal and the gasoil crack spread traded on the IntercontinentalExchange has recently rebounded to around $15 a barrel on weakness in the underlying Brent contract. LGO-LCO1=R
Oil traders said that the German plant typically processes light, sweet crude sourced from the North Sea and exports its fuels mostly to other parts of Europe and the United States.
(Reporting by Michael Hogan and Emma Farge; editing by Jason Neely)
August 13, 2011 at 12:43 am #4978
Market sceptical of two Europe refinery projects
LONDON, Aug 11, 2011 (Reuters) – This week’s sale of Germany’s Wilhelmshaven oil refinery after the plant sat idle for two years and the revival of a project to build a new plant in Britain both surprised traders, who said they saw little economic rationale for either one.
Private Dutch group Hestya Energy on Wednesday said it would restart the second-biggest German refinery as soon as possible after buying it from U.S. group ConocoPhillips , which had cancelled plans to upgrade the plant and put it up for sale over a year ago. “I think people are really sceptical it will restart. There was no obvious reaction in the market to the news,” said a European fuel oil trader.
GE Oil & Gas on Thursday said it planned to build an oil refinery in Britain in a joint venture with a small UK firm, after a similar project in the same location in Teesside failed a few years ago.
Analysts have said they see no argument for adding new capacity in Europe (Chicago Options: ^REURTRUSD – news) .
“The only reason you’d start it up is if there is not enough capacity in Europe or if, specifically, there’s a shortage of simple capacity. Then it could be quite niche,” said a gasoline trader.
But almost a fifth of European capacity is currently unused amid high oil prices and economic gloom on both sides of the Atlantic (Stuttgart: A0J3C9 – news) . Runs in July were at 82 percent, 4 percent lower than last year’s at a time when output typically peaks because of the driving season demand.
“The market is nonplussed,” by the Wilhelmshaven deal, said a European gasoline broker.
Traders said both announcements were short-term responses to a recent improvement in refining margins.
“Margins are good in these days,” a trader said. “But the (GE) project looks dubious to me. A refinery next to it was shut long time ago.”
A Reuters model showed refining margins in Europe have improved to about $7.40 a barrel in the last two weeks, compared with an average of about $3.50 in the past year, due partly to a sharp fall in crude oil prices and some demand for refined oil products within the area and from West Africa and Latin America.
Traders speculated that the Wilhelmshaven refinery could be converted into an oil storage terminal, which would have an advantage in its strategic location on the north-west coast of Germany.
Many refineries in Europe have already been turned into storage sites, including a smaller German refinery owned by Shell. The oil major announced plans to convert the 110,000 bpd Harburg plant into a terminal in January this year after failing to find a buyer. #
In 2008, when the margins were at record highs globally, the energy equipment and services arm of GE, the largest U.S. conglomerate, was awarded a contract to build a deep conversion unit in Teesside by SONHOE Development, but the project never took shape.
Petroplus’s 117,000 barrel-per-day Teesside refinery was shut in 2009, and the plant now operates as an oil terminal. (Additional reporting by Ikuko Kurahone, editing by Jane Baird)
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