Insight: Lost in translation: U.S. refining model floors Petroplus

Wed Apr 4, 2012 9:30am EDT
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By Simon Falush and Zaida Espana

CORRINGHAM, Britain (Reuters) - Flush with success in building up his oil refining business in the United States, New Yorker Thomas O'Malley was confident he could repeat the trick in Europe at the helm of Petroplus.

Now the man nicknamed the "godfather of refining" has gone, Swiss-based Petroplus is in administration and only one of its five refineries has avoided at least temporary closure.

The future of all five remains in doubt, threatening thousands of jobs in central and northern Europe.

O'Malley arrived in 2006 at Petroplus PPHN.S, a company founded by two Dutchmen steeped in the European oil industry, just as the big oil majors were selling refineries across the continent even though refinery profit margins were enjoying a rare upturn.

Under his leadership Petroplus became Europe's largest independent refiner by capacity, but over time the oil majors' decision to step back from refining proved wise.

By contrast, O'Malley pursued what turned out to be a disastrous strategy, displaying bad timing and a poor understanding of how the economics of the refining industry varies between regions.

Like so many businessmen, the self-confessed "short, bald Irishman" from a working class New York City background, failed to foresee the global financial crisis which struck in 2008, and the consequences for fuel demand.

"The future can never be certain, but it is my belief that we will continue to see strong refining margins well into the next decade," O'Malley said in the company's 2006 annual report.   Continued...

The Petroplus refinery is pictured in Cressier near Neuchatel, in this file picture taken May 12, 2011. REUTERS/Denis Balibouse/Files