UPDATE 2-Trader Gunvor buys Petroplus' Antwerp refinery
* Refinery located in Europe's key oil trading hub
* Gunvor diversifies further from pure trading ops-Tornqvist
* Operations to restart as soon as possible after shutdown (Adds analyst comment, background)
By Zaida Espana
LONDON, March 2 (Reuters) - Swiss-based trader Gunvor, co-owned by a Russian tycoon, said on Friday it was acquiring insolvent Petroplus' refinery in Antwerp in Belgium, in a move to expand its infrastructure footprint in Europe's largest oil trading hub.
Gunvor, co-owned by Gennady Timchenko, has expanded dramatically into foreign trade and assets while ceding a top spot in the Russian crude oil export market to rivals in the past two years.
The acquisition is in line with a wider move by major trading houses into storage and other plays, which has seen Gunvor's rivals Vitol and Trafigura recently start joint ventures in the downstream sector in Africa.
The exposure to refining assets also allows the trader to be better prepared for upcoming stringent regulations of commodities trading, which may impose limits on derivatives trading unless the firm can prove it needs them for hedging purposes due to its exposure to physical markets.
Gunvor said the purchase was in line with its infrastructure investment programme, as it sought to become vertically integrated.
"(It) will be a significant asset for the group as we look to expand our presence and trading activities in the ARA region, as well as continuing our wider strategy of diversification from pure trading operations," co-owner Torbjorn Tornqvist, Chairman and CEO of Gunvor Group said in a statement.
Despite being one of the least complex refineries in the Petroplus stable, analysts believe the plant's location offers a good opportunity for the trading house close to the major trading hub of ARA and close enough to benefit from potential Russian crude supplies.
"The value of the Antwerp refinery is its location in the trading hub and obviously it is of interest to players that are active in the trading business," David Wech from Vienna-based energy consultants JBC Energy said.
Gunvor aims to restart operations in the plant as soon as possible following its closure in February after Petroplus, Europe's largest independent refinery by capacity, filed for administration.
The refinery has a processing capability of more than 100,000 barrels per day (bpd), Gunvor said, and storage capacity of more than 1.2 million cubic metres.
"The Russians have been looking for some overseas capacity because they're not planning much in the way of additional refining capacity within the country, and are upgrading what they've got," refining industry analyst Roy Jordan at Facts Global Energy said.
"They're looking outside for refining capacity as they are long in crude, so I suppose it's not particularly suprising for Gunvor because they're a trading company and this is, of course, a trading hub."
But buying into the sector could be a costly venture, according to analysts, with estimates on the costs for a basic upgrade running between $100 million-$200 million.
Europe's refining industry has struggled to remain profitable in the face of overcapacity and waning demand.
"It's not a big enough refinery to compete on a worldscale. They could add a distillate hydrotreater and give it more capacity to upgrade gasoil parcels - something like that could cost between $100-$200 million, maybe a bit more if they can't get hydrogen locally in Antwerp or have to build their own hydrogen facilities," said Stephen George, senior refining analyst at KBC.
In the first nine months of 2011, Petroplus said Antwerp had a relatively weak benchmark refining margin of $3.34 a barrel, the lowest of its five refineries. ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
TIMELINE on Petroplus
FACTBOX on Petroplus assets
FACTBOX on European refineries facing closure or sale:
FACTBOX on storage capacity
For a special report in trading houses ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
EXPANSION OF INFRASTRUCTURE PORTFOLIO
Tornqvist is confident Gunvor will integrate Antwerp fully with its trading operation to ensure it becomes a profitable and sustainable part of its infrastructure portfolio.
Industry sources said under Petroplus the refinery used to run Urals crude, which would make Gunvor's acquisition a perfect fit to supply the plant.
Crude oil typically accounts for at least half of Gunvor's total traded volumes, although its stake in other energy products like fuel oil has been trending higher in recent years.
Recent closures and partial shutdowns of refining capacity in the Atlantic basin has lent some support to refineries' profit margins, but analysts expect further pain ahead.
"The dust hasn't finally settled yet - we lost 1.5 mln barrels of capacity over the past the 3-4 months and they just keep closing," said George. "Too many people are wondering how much capacity has to close before the pressure is off."
Trading houses have also pushed ahead with a move to diversify from their trading activities into the storage business in key regions such as West Africa and the Middle East.
Gunvor recently agreed to build an oil storage and trading terminal in Sao Tome, a small Atlantic archipelago nation sitting in Africa's Gulf of Guinea region. It also has capacity in Oman's Port of Sohar, while rival Vitol owns storage at the United Arab Emirates' Port of Fujairah.
Insiders expect the Antwerp plant could eventually be turned into storage, although a source at the refinery said Gunvor's bid was favoured because it offered guarantees to keep the refinery working.
"It seems to be really serious - there were a few others that bid but they were not so clear in the business plan and didn't want to give a guarantee ... But this possible buyer is committed to keeping it as a refinery", the source said.
The deal, which Gunvor said had support from the local and Belgium state authorities, is expected to be formally completed within 6 to 8 weeks. (Additional reporting by Claire Milhench and Dmitry Zhdannikov; Editing by William Hardy and James Jukwey)
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