Whitegate in line to refine high quality oil discovered off the south-east coast

WHITEGATE Oil Refinery may be chosen to refine the high quality oil discovered off the south-east coast by Providence Resources.

However, the refinery, located near Midleton, Co Cork, requires investment of €200 million over four years to bring it up to international standards.

While Providence will choose its refinery on the basis of quality and cost, the proximity of Midleton to the oil source off Hook Head ought to give the Irish refiner the inside track.

With the well still afew years away fromproduction, Jim McCullough of Davy Stockbrokers, which acts for the group, said no decision would be taken on such matters until the company got closer to production of the black gold.

In the meantime, the imminent sale of the refinery has put a new focus on this island’s only oil refining facility.

Topaz Energy, owners of Statoil and Shell’s petrol stations in Ireland, and Bord Gáis are interested in buying the business with an estimated value of €350m.

Whitegate is being sold by US energy giant ConocoPhillips, which no longer considers it a core asset.

Canada’s Irving Oil and Switzerland-based Petroplus were also rumoured to be interested in buying the refinery.

Bids were lodged a little over a week ago and Deutsche Bank in London is handling the sale.

Ninety per cent of Whitegate’s output is sold in Ireland with the balance supplied to European markets.

Topaz is understood to be the refiner’s biggest customer.

Whitegate was sold by the state to Tosco in 2001, with a stipulation that it must remain open for at least 15 years.

Tosco is now part of ConocoPhillips.

The group is listed in New York and plans to retain ownership of the Whiddy Terminal in Bantry Bay.

Though small by world standards, a shortage of refining capacity globally means the Whitegate refinery should attract significant interest.

According to the memorandum of sale, Whitegate achieved an operating profit of $67m (€48m) on turnover of just under $2 billion in 2006.

That compares with an operating profit of $47m in 2005 on sales of $1.7 billion.

Retained earnings, after taxation and financing costs were deducted, amounted to $23m last year.

ConocoPhillips is projecting an operating profit of more than $100m for 2007, based on higher margins, helped by rising oil prices.

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