Good afternoon everyone,
It isn’t often that you see a big company start from scratch.
PBF Energy is an exception.
The New Jersey-based company got its start in the depths of the recession when refining industry veteran Thomas O’Malley saw an opportunity, one involving the recently shuttered Valero refinery in Delaware City.
O’Malley, now retired, had assembled a team that knew a lot about the refinery that had been operated by a company he earlier headed that was later sold.
Delaware City had been a disaster for Valero. Although the Texas company has a good reputation, a bad economy and the complexities of running a site that processes both heavy and light crudes proved to be too much. The refinery, like Chrysler, GM and Claymont Steel, was on a path to demolition.
But the wily O’Malley had connections with private equity. Gov. Jack Markell and then- economic development chief Alan Levin moved quickly on a financing package to help seal the deal.
Upwards of a thousand jobs were saved. PBF then snapped up a refinery up the river in Paulsboro, NJ, followed by a site in Toledo, Ohio.
A blend of good luck, sound practices and good workforces helped the refineries operate efficiently and safely while dealing with increasingly stringent clean air requirements
PBF needed to get bigger and embarked on a strategy that proved to be successful – buying smaller refineries from big oil companies at a reasonable cost and partially spinning off tank farms and other assets to a limited partnership. (See chart above from PBF)
After successfully operating Delaware City, PBF acquired a nearby refinery in Paulsboro, NJ, followed by a strategically placed site in Toledo, Ohio.
Its refineries allowed the company to profit from discounts that can come if supplies of one grade or the other become excessive. In the case of Delaware City, PBF added to its flexibility with a $100 million rail terminal that could receive crude from North Dakota and Canada
A big opportunity came in buying a New Orleans-area site partly owned by ExxonMobil. Next was an ExxonMobil Southern California refinery that was under repair after an explosion.
Both refineries were well maintained and in the case of the Torrance, CA site, PBF did not take ownership until ExxonMobil successfully operated the site. Torrance also came with assets that included a pipeline to oil-producing areas of the state and a fuel pipeline to LA. International Airport.
PBF pounced again last week by agreeing to acquire a Shell refinery outside San Francisco. This time around, the company agreed to pay upwards of $1 billion for a smallish refinery with storage and port facilities.
With a sixth refinery, PBF can produce a million barrels of fuel a day. That’s a lot, but it’s still small potatoes compared to larger refineries in the U.S. and elsewhere.
What’s next? It’s hard to say, but PBF will carefully weigh available candidates and will not overpay.
PBF knows the risks that come with a difficult business that requires a relentless focus on operating efficiencies and osafety.
Here’s hoping for smooth sailing on the clean air front for PBF’s Delaware City plant and an end to this bout of weather.
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