Vitol's Viva Energy buys stake in Australian fuel supplier

MELBOURNE Mon Aug 25, 2014 3:54am EDT

MELBOURNE (Reuters) - Swiss-based trading giant Vitol [VITOL.UL] has bought a minority stake in an Australian fuel supplier to help shore up demand for fuel from the Geelong refinery it recently took over from Royal Dutch Shell (RDSa.L).

Vitol's Viva Energy, which bought Shell's refinery and 870 service stations in Australia for A$2.9 billion ($2.7 billion), said the investment in Liberty Oil was aimed at improving the refinery's outlook.

"We look forward to further strengthening this relationship by supporting Liberty both as an investor and a reliable fuel supplier," Viva Chief Executive Scott Wyatt said in a statement.

Viva Energy and Liberty declined to comment on how big a stake Viva acquired or how much it paid. The deal is subject to regulatory approval by Australia's anti-trust watchdog.

Liberty had held talks with other companies about the stake, but Liberty Managing Director Paul Edmends said Viva was a "natural fit" given it is a big supplier to Liberty.

"A significant percentage of our offtakes are sourced from Geelong and we expect this to grow in the coming years," Edmends told Reuters in an email.

Australia's ageing refineries have mostly booked losses over the past several years as they struggled to compete against newer mega processing sites in Asia, leading majors like Shell and BP (BP.L) to sell plants or convert them to fuel terminals.

Taking advantage of the new fuel importing opportunities, Vitol and rival Trafigura Beheer BV [TRAFG.UL] have moved into Australia to become fuel retailers over the past 18 months, changing the local landscape.

Rival Caltex Australia Ltd (CTX.AX) reported a flat underlying profit of A$173 million on Monday, with growth in its marketing and distribution business offsetting losses in its refining arm.

Caltex Australia Managing Director Julian Segal said while the big traders were very competitive, they were also disciplined about earning a good return on their investments, suggesting they were unlikely to slash prices just to win business.

"What's within our control is getting fit to meet this competition ... I think this set of results we published today demonstrates that we are capable of doing that," Segal told reporters.

Caltex, in the process of converting its Kurnell refinery in Sydney into a fuel terminal, gained market share in jet fuel, with sales up 11 percent in the first half of the year to 1.3 billion litres in a market where demand grew 4 percent.

The company plans to axe a tenth of its workforce, or 350 jobs, within the next 12 months to help cut around A$100 million a year in costs from 2016. The job cuts and depot closures are expected to cost between A$130 million and A$155 million, to be booked in results for the year to December 2014.

Caltex shares rose to a seven-year high after it raised its dividend more than expected, and closed up 7.4 percent on Monday at A$27.45, adding to its heavy outperformance of the broader market .AXJO this year.

(1 US dollar = 1.0733 Australian dollar)

(Reporting by Sonali Paul; Editing by Tom Hogue)

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