* 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 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
"(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
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
"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)