Europe oil refining guru back with growth plan

Fri Dec 20, 2013 8:59am EST

* Van Poecke says has growth plan for Carlyle/Vitol JV

* Follows JV buying into German refinery this week

* Says best refineries can survive and make money

By Ron Bousso and Dmitry Zhdannikov

LONDON, Dec 20 (Reuters) - One of Europe's most successful oil entrepreneurs, Marcel van Poecke, is back with a plan.

Having made his name and fortune in oil refining during the peak years of the early and mid-2000s, the Dutchman wants to repeat that success in the next few years despite predictions of a demise for the sector in Europe.

The message now from the businessman is much more nuanced than a decade ago. He sees no revival for European refining that faces severe competition from plants in Asia, the United States and the Middle East.

However, the best refiners can survive and still make money, says the man who is spearheading private equity giant Carlyle Group's tie-up with the world's top oil trader Vitol to run refining, storage and distribution assets in Germany and Switzerland.

"We have a clear ambition to grow and that's what Carlyle is about ... Growth capital and growing companies. Vitol is the same," Van Poecke, managing director of Carlyle International Energy Partners (CIEP), told Reuters.

Carlyle's move this week to enter the Varo joint venture with Vitol to buy a 45 percent in Germany's 260,000 barrels per day Bayernoil refinery from Austrian group OMV raised eyebrows as Europe's oversized refining sector which is in the midst of a painful restructuring.

Carlyle International Energy Partners (CIEP), set up by the fund last year, this week bought a 50 percent stake in Varo, which already owns Swiss refinery Cressier as well as storage and distribution facilities in the region.

"It is difficult to say where that (Varo) will go but it is clear it will grow," said Van Poecke.

"This is really growth capital as I see it. Building a new company to benefit from the restructuring of the market. It is not selling high and buying low, its really about building a new company."

Van Poecke owns AtlasInvest, an investment holding company, which had a minority stake in Varo Energy venture with Vitol. The stake was bought out by Carlyle. The cost of the deals was not disclosed.

Van Poecke was also one of the founders of independent refiner Petroplus, in which Carlyle and another fund Riverstone were investors.

He exited Petroplus in 2006, seen as one of the peak years for European refining, after an initial share offering which at the time generated the highest multiple return investment for the Carlyle/Riverstone Energy Fund.

The fortunes of Europe's refining saw a steep decline at the end of last decade and Petroplus went bankrupt two years ago, weighed down by heavy debt and low profit.

TRADER ROLE

The partnership with Vitol, which in two years bought two refineries, makes perfect economic sense to van Poecke. And in the current environment, Varo could serve as a model for other trading companies and private equity fund, he added.

"Vitol have access to all sorts of crudes and know the market very well."

"This could be the direction the market takes as more major oil companies are leaving the space. There is room for companies like Vitol combined with private equity like Carlyle to get into this space. It is a very natural fit."

The European refining sector is expected to shed at least one million bpd, or around 10 percent of its capacity, in the coming years.

But the key for a successful investment lies in the location and distribution network, according to van Poecke.

"We would like to grow around this core area which we think is very good. Along the Rhine river, (the sector is) very strong in Germany and also in Switzerland."

"It is a difficult time for European refining but some refineries do better than others and what we are focused on are refineries that are best in their class not only compliant with the newest legislation but also very specific in terms of the products they can make."

He said Europe was still short diesel, jet fuel and heating oil and with every refinery closure those shortages could get bigger: "We need a balance between refining, marketing and wholesale."

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