BP Sale Makes US Investor Germany’s Second-Largest Oil Refiner

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(Bloomberg) — Over the past three decades, American investor A. Gary Klesch has amassed a portfolio of struggling steel mills, aluminum smelters, chemical plants and oil refineries, betting he could squeeze value from businesses their previous owners no longer wanted.

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Now, with the takeover of BP Plc’s Gelsenkirchen refinery, Klesch Group Ltd has become Germany’s second-largest oil refiner and the biggest shareholder in one of the country’s most important crude oil pipeline networks. Together with Germany’s ten other refineries, it produces fuel for trucks, aircraft and ships, and underpins much of the country’s chemical industry.

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At a moment when supply chains are under stress from wars in Ukraine and the Middle East, the sale to the privately held Malta-based company has raised concern about energy security in Europe. 

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The move is also the latest sign of a broader shift in Europe’s refining industry. In recent years, the oil majors that rose during the continent’s post-war industrial expansion have reassessed their refining portfolios as aging plants become increasingly expensive to maintain and tougher environmental regulations drive up the costs of keeping them compliant. Unexpected events can add to the burden. At Gelsenkirchen, for instance, a fire last month forced some of the plant’s units, including one that’s key to making diesel, to temporarily shut down.

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Holding onto refineries no longer makes financial sense for many oil majors, said Tibor Fedke, a partner at the Noerr law firm who has advised on several such deals. Companies such as BP, Shell Plc and Exxon Mobil Corp. have all weighed shedding assets or scaling back operations at some of their European facilities.

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BP said in a statement on Monday that it expects to save as much as $1 billion a year in operating costs by selling the facility, and did not comment further in response to questions from Bloomberg.  Fedke noted that such sales have the extra benefit of “eliminating the largest CO2 footprint from a company’s balance sheet.”

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While those long-term pressures have made many sites less attractive to large integrated energy companies, the disruption to global fuel markets following Russia’s invasion of Ukraine has boosted refining margins. That has presented an opportunity to privately owned commodity traders and investment firms willing to bet they can generate returns. But should margins weaken again, refineries’ high operating and investment costs could become difficult to justify.

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Klesch entered the refining business in 2010, and its two existing refineries in Heide, Germany, and Kalundborg, Denmark, together process less crude than Gelsenkirchen’s roughly 265,000 barrels per day. The company has previously clashed with regulators, suing the German government in 2023 over a temporary windfall tax on energy companies introduced after Russia’s invasion of Ukraine. It also shelved plans for a green hydrogen plant at the Heide site.

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Klesch declined to comment to Bloomberg News.

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According to Fedke, the new generation of refinery buyers are typically specialty funds or family-owned companies that are less reliant on “Western capital markets or green reporting.”