By Sarah Kent
The world's largest independent oil trader closed its
biggest-ever acquisition Friday in a bold deal to buy Royal Dutch
Shell PLC's downstream business in Australia.
The $2.6 billion deal will give Dutch oil-trading titan Vitol
Group SA a substantial foothold in the fast-growing Australian
market.
The company is already very active in the region. "This is
obviously a significant move to buy a system...that will help them
build out their position," said Roland Rechtsteiner, partner and
global head of the oil and gas practice at consultancy Oliver
Wyman.
Under the acquisition, Vitol and its investment partner, Abu
Dhabi Investment Council, will purchase Shell's
120,000-barrels-a-day Geelong refinery and 870 gas stations as well
as gaining lucrative supply contracts to Australia's big mining
companies and other downstream interests.
The deal stands to strengthen Vitol's trading position in an
attractive market. Australia is the world's third-biggest fuel
consumer and, unlike in other developed countries, demand continues
to grow. Meanwhile, stiff competition from larger and more
sophisticated refineries in Asia has led many of Australia's
refineries to close in recent years, driving up its demand for
imports.
According to consultancy JBC Energy, Australia's net oil-import
requirements will soar this decade, rising to 570,000 barrels a day
in 2020 from 366,000 barrels a day in 2013. Vitol's rival Trafigura
Beheer B.V. has also expanded its footprint in the country,
spending more than $800 million snapping up storage terminals and
retail stations there in the past year.
"It fits in with [Vitol's] trading strategy," said Jonathan
Leitch, head of oil-product short-term analysis at Wood Mackenzie.
"Vitol is an active trader, so having that refinery gives them a
footprint and the opportunity to expand, and it gives them an
insight into what is actually happening."
The deal with Shell builds on a substantial push by Vitol into
the downstream sector in recent years. The company spent $1 billion
to buy Shell's retail stations in Africa in 2011 before snapping up
Switzerland's Cressier refinery from a bankrupt independent refiner
in 2012. Late last year, the company joined with private-equity
giant Carlyle Group to buy OMV AG's Bayernoil refinery in
Germany.
The big-ticket deal making comes as the world's biggest
commodity merchants are increasingly investing in significant
assets to support their trading businesses. Investments in
infrastructure like refineries, oil terminals and pipelines can
help traders secure their position in the market and lock in
profits in a high-volume, low-profit business.
Write to Sarah Kent at sarah.kent@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires