Selling Chevron’s Pembroke refinery may prove difficult warn industry experts (From Western Telegraph)

Selling Chevron’s Pembroke refinery may prove difficult warn industry experts

10:30am Saturday 20th March 2010 in

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Finding a buyer for Chevron’s Pembroke refinery could be difficult in the current financial climate, industry experts have warned.

The oil giant announced plans last week to streamline its global downstream portfolio, “including soliciting bids for certain operations in Europe (including the Pembroke refinery).”

However, Nick McGregor, of stockbrokers and market commentators Redmayne-Bentley, said it would not be easy to find a buyer for the Pembroke plant, which employs about 1,400 people.

He said: “The biggest issue is not so much in selling refineries but in finding buyers who are financially stable enough not just to pay the purchase price, but to ride out the business cycles in the industry which can see such sites swing from being very profitable to loss making very quickly.

“In the case of Pembroke it is unlikely that any of the other so-called ‘oil majors’ are potential purchasers as most have placed their own refining operations under review due to huge losses in the sector during 2009. “These vast and affluent firms are able to ride out the cycles in the industry and the concern would be that any buyer may not have the same balance sheet stability. Many other refineries throughout Europe are currently on the market and this will make finding a buyer for Pembroke all the harder to achieve.”

Mr McGregor said refineries worldwide have been losing money and a drop off in demand during the economic slowdown has resulted in the UK’s refineries operating at a lower capacity.

However, he said there may be a silver lining.

“If the economic outlook continues improving then this should start to improve demand for refined products and profit margins in the refining industry,” he added.

“At this point current owners may decide to hold onto assets they had identified for sale, or at the very least buyers will see a more compelling case for making further acquisitions.”

ICIS Chemical Business deputy editor, Will Beacham, said: “Frequent changes in ownership of petrochemical operations have become common place in recent years.

“A competitor might step in and new players from the Middle East and Asia are now buying up European chemical and oil operations.

“However, smaller, older, less uncompetitive plants in Europe may be closed down if a buyer cannot be found.”

Making the announcement last week, Pembroke refinery’s managing director, Tom Kovar, said there are no plans to close the site and no final decision on the sale has been made.

He added: “It is not going to close and we are not going to have massive layoffs. Our focus here is to run this refinery as safely, reliably and efficiently as we can.

“There are in excess of a thousand people on site and they are good folks, they know their jobs and we need to keep them focused and not let this become a distraction.

“We certainly appreciate the distress it can cause and the concern, but our main focus here does not change, we will continue to run the refinery and focus on our three main areas — safety, reliability and efficiency.”