Refiner Hellenic Petroleum (HELPE) plans to invest 450 million euros over the next three years to build a hydrocracker, which is expected to add 120 million euros annually to core profits, its chief executive said yesterday.
The country’s largest refiner has decided to invest in a distillate hydrocracker to meet the growing domestic demand for diesel and also due to the growing premium for cleaner fuels, CEO Panos Cavoulacos told Reuters in an interview.
“The board of directors is expected to decide in the first half of June on where to locate the facility. We expect to have the hydrocracker operating in 2009,” he said.
“We will have an additional earnings before interest, tax, depreciation and amortization (EBITDA) of 120 million euros annually from the hydrocracker unit.”
Hellenic Petroleum posted 372 million euros in EBITDA in 2004.
While the refiner has yet to decide on the size of the hydrocracker, the unit could substitute up to half of Greece’s imports of gas oil, the bulk of which comes from Russia, Cavoulacos said.
Since Jan. 1, the refiner has been producing 50 parts per million (ppm) sulfur motor fuels in line with European Union specifications, upgrading its three facilities at a cost of 85 million euros.
There are plans for further upgrades to meet a lower 10ppm EU sulfur limit from 2009, Cavoulacos said.
“We aim to spend a little more than 100 million euros over the next three years to increase our desulfurization capacity at all three refineries and to make 10ppm sulfur fuel,” he said.
Cavoulacos said current high oil prices and refining margins are in part encouraging the upgrades. “Higher oil prices and refining margins are signals to companies that it is attractive to invest in new facilities,” he said. “We expect refining margins to stay at least at the mid-cycle level for at least several years.”
He said high refining margins boosted the refiner’s first-quarter results but declined to provide more details. The refiner is expected to report results later this month. “We had a strong first quarter due to high refining margins in the second half of the period, despite the weak dollar,” Cavoulacos said.
He reiterated the company’s target of doubling EBITDA in 2009 and lifting the return on capital employed (ROCE) to above 10 percent compared with 2004 figures.
Power boost
On the refiner’s electricity plant now under construction in Thessaloniki in northern Greece, Cavoulacos said the facility should begin operating in November, boosting results next year.
“We expect a return of 35-50 million euros in EBITDA in full-year result from 2006,” he said
Hellenic Petroleum plans to diversify its portfolio, expanding into upstream activities, with the business built around Libya, where it has six exploration blocks jointly with two other oil companies. It is also evaluating Albania.
“We expect to have significant exploration and production operations,” Cavoulacos said. “We are targeting a production of 50,000 barrels per day in four or five years.”
(Reuters)