Oil baron eyes Valero plant for US return

Tom O'Malley (SUPPLIED)

The last time refining maverick Tom O'Malley bought the oil refinery in Delaware City, Delaware, he doubled his money in two years. Now he may be vying to do it again.

An investment group led by O'Malley is in talks with Valero Energy Corp, the top independent US refiner, to buy the assets of the shuttered 210,000-barrel-per-day Delaware City refinery.

If the deal goes through, it would mark O'Malley's reentry into the US refining sector as it faces its worst crisis in decades. PBF Investments would acquire a refinery that was losing $1 million (Dh3.67m) a day in November, when Valero said it was closing the plant for good.

Delaware City could be the first refinery purchase for PBF Investments, a $2 billion investment vehicle formed in 2008 to buy US refineries. Petroplus, where O'Malley is currently chairman, started PBF along with private equity firms Blackstone Group, and First Reserve Corp.

"O'Malley has a track record of buying refineries at low prices, running them for a few years, and then selling them," said Tim Evans, energy analyst for Citi Futures Perspective.

The sale could test O'Malley's vaunted reputation for turning around ailing assets, since it comes at a time when US refiners are reeling from a third straight year of dismal margins, amid slumping fuel demand during a recession.

While O'Malley served as its chief executive, refiner Premcor Group bought the plant in 2004 from Shell Oil Co and Saudi Aramco for about $4,500 per barrel.

The company doubled its money when it sold the refinery to Valero in 2005 for an average price of about $10,000 per barrel, according to figures from Macquarie Research. Terms of the latest potential sale were not disclosed and Valero said in a statement there was no timeline for negotiations.

Utilisation rates at US refineries fell to 78.4 per cent last week. It was their lowest rate since the 1980s, excluding periods of curtailed activity due to hurricanes. PBF officials were not immediately available to say if they plan to restart the Delaware City refinery or just use the site's crude and fuel storage terminals.

 

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