Sunday, April 11, 2010

O’Malley returns to US refining

The Apr. 8 announcement that Valero Energy Corp. would sell its closed Delaware City refining assets to PBF Energy Partners LP for $220 million marks the return of Thomas D. O’Malley to the US downstream.

O’Malley previously chaired Premcor Inc., which operated 4 refineries with an approximately 800,000 bbl/day throughput capacity, until its 2005 sale to Valero. Before taking over Clark Oil Inc. and turning it into Premcor, he made Tosco Inc. the largest US independent refiner-marketer until its sale to Phillips Petroleum Co. in 2001 for $25 billion.

Since selling Premcor (including the 210,000 b/d Delaware City refinery which he now is buying back) to Valero, O’Malley hasn’t been idle. He started PBF’s parent, Petroplus Holdings AG, with several other former Premcor officers. It has become Europe’s largest downstream independent with 6 plants in Britain, Germany, Belgium, and France.

Its purchase of the Delaware City refinery came more than 2 years it formed PBF with Blackstone Group and First Reserve on Mar. 8, 2008, to pursue US refinery acquisitions. Jean-Paul Vettier, Petroplus’s chief executive, called the acquisition “an exciting opportunity” which “represents a profitable entry point.” Valero, which decided to permanently close the plant in November after it couldn’t find a buyer, began to talk to PBF with the support of Delaware Gov. Jack Markell in early 2010.

This won’t be the first time that a company run by O’Malley has taken over a refinery that someone else doesn’t consider profitable. Tosco’s single biggest acquisition, when he was in charge, was the 238,000 b/d Linden, NJ, refinery in 2001 from ExxonMobil Corp., which decided to reduce its US downstream holdings. Given refining and marketing’s current low profitability compared to exploration and production, Petroplus and PBF could expand their US presence further.


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