Private investor Klesch buys Shell’s Heide refinery

By Ikuko Kurahone and Emma Farge

LONDON (BestGrowthStock) – Private investor Gary Klesch has agreed to buy a refinery from Royal Dutch Shell and he is looking to buy more, potentially providing a lifeline to the battered European downstream industry.

Shell will sell the Heide refinery, associated chemicals, bitumen and distribution infrastructure as well as related marketing businesses to Klesch for an undisclosed sum, the two said in a statement. The deal is expected to close before the end of the year.

“We would expect to buy more,” Klesch said in a telephone interview from Geneva. “If you said, ‘Will you have three to five refineries over the next five years?’, I would see that as being do-able.”

He declined to specify the assets he is looking to buy but he had a particular interest in Germany.

A sharp fall in fuel consumption in Europe and import demand from key markets such as the United States has slashed oil refiners’ profitability in the region since late 2008, putting about a dozen refiners up for sale, including Heide, which had been on the market for more than a year.

Many sellers have been struggling to offload assets. Forecasts that refining margins will not recover to record high levels in 2005-7 have kept potential buyers away.

But Klesch said he has a different view and he was positive on the long-term demand perspective.

“People are pretty negative on European refining and if there’s any positive, the message is ‘go east young man’ … I’m taking a 15-20 year view. Look at the macro view, Europe is not going away. I’m looking long-term and Germany is the engine of Europe,” he said.

Heide is a relatively small, landlocked refinery with a capacity to process about 93,000 barrels of crude oil per day. Klesch said the complexity of the refinery is about 9.3, which makes it a medium-complex plant.

“I like the complexity of the plant and I love the products it makes,” said Klesch, owner and chief executive of Klesch & Co. The plant will continue to supply the market in Germany.

The Heide sale will also be the first refinery deal in Europe since French major Total’s sale of a part of its Dutch Vlissingen plant to Russia’s Lukoil in June last year.

NO CLIENTS

Klesch, who confirmed he was a billionaire, does not have clients. He declined to disclose the exact value of the assets and said: “I own everything.”

Klesch, which is focused on long-term investments in industrial and commodities related businesses, has previously shown interest in the refining sector.

Last year, it started negotiations with Italy’s Eni to buy its Livorno refinery but Eni later said the refinery was no longer for sale.

Outside Europe, Klesch signed an $8 billion deal to invest in a 300,000 barrels per day oil refinery in Libya in 2008.

Shell has been looking for buyers for other refineries in Europe as part of its plan to divest about 15 percent of its global refining capacity.

India’s Essar Energy had been in talks to buy three of Shell’s refineries, including Heide. It remains in talks with Shell about the other two, Shell said.

“Shell has an ongoing divestment program and we are in negotiations to sell Shell Stanlow in the UK and Harburg in Germany,” a Shell spokesman said.

“We are in non-exclusive talks with Essar for the potential sales of Stanlow and Harburg.”

Investment bank Lazard Ltd said it advised Shell on the Heide deal.

(Additional reporting by Pratima Desai; editing by Sue Thomas)

Private investor Klesch buys Shell’s Heide refinery