ECONOMY

Petrola rejects fears of oligopoly from refinery merger with ELPE

«United we stand» could be said to be the basic slogan on which the Latsis group based its arguments in seeking the merger of its Petrola refinery with its bigger rival, state-controlled Hellenic Petroleum (ELPE), a move quite in line with international trends. Theodoros Vardas, Petrola’s deputy managing director and general marketing manager, was a longtime aide to the late founder Yiannis Latsis and participated in the negotiations which were successfully brought to a close last week. In this interview with Kathimerini, he argues that the synergies projected to emerge from the deal are much too important to ignore and that the group is satisfied with its two-member representation on the new board of directors. He rejects charges that the merger will create an oligopoly, saying there is no such thing in the refining market, and considers an alliance with a foreign group a prerequisite for a successful presence in foreign markets. The merger was a chief goal of – and, to a degree, a prerequisite for – Petrola from quite an early stage in Hellenic Petroleum’s tender for a strategic partner. What were the reasons behind the pursuit of this option? In the international oil market, as in all other sectors in today’s globalized and competitive market, buyouts, mergers and other forms of partnership are among the most effective ways of strengthening companies and creating synergies and economies of scale. In our sector, important such deals took place in the recent past, giving rise to Exxon Mobil, TotalFinaElf, Chevron Texaco and, more recently, between BP and TNK in Russia. It was with this rationale that, within the framework of the agreement, we offered Hellenic Petroleum a neighboring refinery which creates very significant synergies, estimated at about $300 million at current values. We can also contribute our experience and know-how from our considerable international activities to Hellenic Petroleum’s further growth. To what extent does Petrola’s participation with two members in ELPE’s board of directors serve your interests as strategic partner with a 25 percent stake? As you know, the deal provides for the absorption of all Petrola personnel by ELPE. We consider that the participation of our people in the new company, combined with two members on the board of directors, is a satisfactory arrangement. How do you reply to the charges that the merger of the country’s two largest refineries creates an oligopoly in the domestic market? I entirely disagree with this criticism. As you know, Petrola conducts no retail operations and as a result ELPE’s market share remains the same. It makes no sense to speak of an oligopoly in the refining market. Distribution companies are free to buy products from whomever they choose, either at home or abroad. The market is globalized and freely accessible. How important do you consider a partnership with an international energy group in order to achieve expansion abroad and what is the significance of new activities such as power production, petrochemicals and hydrocarbon exploration, and of the new markets which the group is entering? International partnerships are a prerequisite for successful growth abroad and the company will seek them out. Initially, we shall focus on the wider region of Southeast Europe, where growth rates are high and geographical distances from Greece small. Expansion requires the growth of core business as well as of the other activities you mentioned. What will be the obstacles to integrating the functions of the two entities? According to what criteria will the Latsis group seek its representation in the administration of ELPE subsidiaries in order to maximize synergies at a functional level? The successful implementation of a merger deal is the most delicate and difficult phase, as the fulfillment of the expectations of the constituent parts depends on it. It presupposes close and sincere cooperation in order to achieve the speediest homogenization of human resources, organization, operating systems and business culture. In our case, Petrola’s experience and activities in refining and wholesale are close and complementary to ELPE’s. We have known each other at a personal level for years and our people have been collaborating at many levels, such as safety, environment and pipelines. We expect integration will be based on meritocracy. So far, there has been emphasis on the synergies that will emerge, particularly as regards operations abroad. What will be the benefits for the domestic consumer? Our clients are distribution companies and large consumers, to whom we also provide a number of services, such as storage, insurance, transportation and accessibility to loading points. Our storage installations and modern loading stations, combined with the linking of the two refineries with pipelines will permit a considerable improvement in these services that will be reflected in the final supply costs to clients.