Incorporated: 1920 as Petrofina S.A.
Sales: BFr578 billion (US$18.72 billion)
Stock Exchanges: Brussels Antwerp Paris Amsterdam Frankfurt Z#x00FC;rich Basel Geneva New York London
While not among the world’s largest oil companies, Petrofina is widely regarded as one of the most successful. It lost most of its assets during World War II, and has achieved its current position virtually from nothing in a matter of 45 years.
Belgium’s largest company, Petrofina is a leading exploiter of North Sea oil and gas, with other exploration and production interests extending through North America, Africa, and the Middle and Far East. It boasts some of the most efficient refineries in the world, in particular at Antwerp in Belgium, Lindsey in the United Kingdom, and Port Arthur in the United States. Under various trademarks, its service stations are seen in most Western European countries, including Belgium, the Netherlands, the United Kingdom, France, Germany, Italy, Norway, and Spain, as well as several chains in the United States.
In contrast with competitors which have moved into areas such as nuclear power generation and metal production, Petrofina has preferred vertical integration to wide diversification. It has, however, started up or bought into activities seen as complementary to its oil interests, especially chemicals manufacturing. Following on from its own insurance requirements, it has become a provider of insurance.
Petrofina was founded in 1920 by a group of Belgian financiers headed by the Bank of Antwerp. Its existence became possible when four Romanian oil companies, confiscated from their German owners after World War I, came up for sale at an advantageous price. Petrofina’s founders were aware of the importance of petrol in the age of motorized transport. Romania, an oil-rich but cash-poor country, presented a convenient entry into an already overcrowded industry. The assets on offer included oil wells, refineries, and distribution networks. On taking control, Petrofina merged three of the four companies to form Concordia, whose 1921 output, at 128,500 tons, represented 11% of Romania’s total crude oil production. Five years later Concordia’s production had tripled.
Petrofina marketed its products in Western Europe through Purfina, an Antwerp-based company jointly established with the American Pure Oil Company, but wholly owned by Petrofina since 1923. To serve central Europe and the Balkans, Petrofina set up Socombel, which supplied small independent outlets until Petrofina acquired its own outlets over the next few years. The company also owned a small fleet of tanker ships.
In 1923 the Banque de 1’Union Parisienne became an important shareholder in Petrofina, resolving a dispute over the prewar claims of a French company on Concordia’s Vega refinery. The arrangement was attractive both to France, anxious to acquire an oil supply independent of the U.S. and British companies, and to Petrofina, which wanted access to the capital markets of Paris.
French Petrofina, a subsidiary started in 1924, won a monopoly on the import into France of Soviet oil products, in which Purfina’s Ertvelde refinery also dealt. French Petrofina soon entered the refinery business, constructing a large plant at Dunkirk; this received most of its crude oil from the United States, since until 1936 Petrofina’s own oil fields were subject to Romanian government prohibitions on crude oil exports. At the approach of war, however, French Petrofina reached an agreement with Romania whereby the company financed arms supplies in return for crude oil.
The Depression of the 1930s affected Petrofina less by its direct impact than by changes it prompted in Belgian commercial law. Legislation passed in 1935 and designed to insulate the banking system from industrial ups and downs obliged the Bank of Antwerp to transfer its shares in Petrofina to the specially formed Antwerp Company. Petrofina, created by financiers and for its first 15 years managed by them, now became an oil company run by oilmen.
Having survived the Depression with its assets comparatively intact, Petrofina suffered catastrophic losses during World War II. The Germans bombed and later dismantled the Dunkirk refinery. Of Petrofina’s five tankers, only one survived the war. The most serious losses, however, were in Romania. Invading German forces seized the oil fields and refineries, and after the war the Soviet Union appropriated all of Petrofina’s Romanian assets, together with its outlets in Hungary and Bulgaria.
Petrofina had not lost quite everything. Distribution subsidiaries, including those in western Europe and Africa, had survived, as had the Ertvelde refinery. The most important element of continuity from prewar days was that Petrofina had managed to retain its work force, whose expertise would be the company’s major strength in the postwar reconstruction period.
In the years immediately following the war, Petrofina—led by president Laurent Wolters—concentrated on rebuilding its distribution network, acquiring three new ships, modernizing its Belgian depots, and restructuring outlets in France, the United Kingdom, the Netherlands, and the Belgian Congo, now Zaire. With virtually no products of its own, it formed an alliance with British Petroleum (BP), which by contrast had oil but lacked adequate distribution facilities. Under an agreement which lasted from 1946 to 1980, BP supplied the oil, crude or refined, that Petrofína required. Lacking funds to rebuild the Dunkirk refinery, Petrofina made it over to BP in exchange for products.
Faced with an unprecedented demand for petrol, the Belgian government decided in the late 1940s that the country’s refinery capacity needed drastic upgrading. Petrofina and BP spawned the Société Industrielle Belge des Pétroles (SIBP) to build a huge refinery at Antwerp, which opened in October 1951 with a capacity of two million tons per annum, equivalent to Belgium’s entire consumption. In the next 20 years the refinery’s capacity was to increase by a factor of eight, making it by far the largest in Belgium, and among the largest in Europe.
Petrofina undertook its first postwar explorations in Mexico, starting in 1949. The Mexican venture proved shortlived. Canadian Fina Oil (Canada Fina) and Canadian Petrofina started exploring on opposite sides of Canada in the early 1950s; in 1961 Canada Fina would become a subsidiary of Canadian Petrofina. Exploration also took place in Africa, including Angola, Zaire, and Egypt, during the 1950s.
In 1956 Petrofina gained a foothold in the United States. American Petrofina was set up in cooperation with the Panhandle Oil Corporation of Texas to operate Panhandle’s oil wells, refineries, and distribution network. By the end of 1957 the company was extracting 11,000 barrels per day (b/d), had refining capacity for 50,000 b/d, and controlled over 1,000 retail outlets.
The 1950s saw Petrofina’s refinery base and distribution networks expanding into Germany, Italy, Sweden, Norway, Switzerland, and Tunisia, as well as North America. It typically entered new markets through acquisitions, financed through rights issues. A dozen large tankers were added to the fleet, the availability of several of which gave Petrofina an edge when the 1956 closure of the Suez Canal added 25 days to the sea journey taken by most of Europe’s oil.
Alongside Petrofina’s main activities, complementary interests were being developed. Palmafina, a margarine and soap-making subsidiary dating from before the war joined a U.S. collaborator in a new venture, Oleochim, founded in 1957 to produce fatty acids and glycerine at Ertvelde.
In 1954 Petrofina had taken a share in Petrochim, a petrochemical venture by a consortium of Belgian chemical companies. Four years later, ready to exploit its research findings, Petrochim began constructing a factory near the SIBP refinery at Antwerp. When the factory failed to achieve the economies of scale needed for profitability, Petrofina took control, together with a partner with extensive petrochemical experience, the American Phillips Petroleum Company. In 1964 Petrofina and Phillips launched Petrochim on a BFr5 billion investment program involving the construction of one of the largest ethylene production facilities in the world; an extraction unit for benzene, toluene, and xylenes; and a synthetic rubber manufacturing plant.
Petrofina’s petrochemical interests grew during the 1960s, with an emphasis on vertical integration. Pipelines were built to take Petrochim’s ethylene to the factories that used it, and Petrofina and Phillips invested in one such factory, Polyolefins. Set up in 1966 to make high density polyethylene, Polyolefins would increase its output by a factor of 5 in its first 15 years.
Petrofina became a major force in U.S. petrochemicals with its 1963 acquisition of Cosden Petroleum Corporation, a leading polystyrene manufacturer with valuable patents and a wealth of expertise. Between 1963 and 1979, Cosden’s petrochemical sales were to grow from US$18 million to US$500 million, necessitating ambitious construction projects, notably Cosmar, a styrene plant in Louisiana feeding Cosden’s original polystyrene plant at Big Spring and an additional plant at Calumet City.
1963 also saw Petrofina’s entry into the paint market with Oleochim’s purchase of Astrolac. This move fitted neatly into the portfolio: paints and varnishes were needed for Petrofina’s ships and plant, and Petrofina’s refineries could supply many of their ingredients.
Around the same time, Petrofina was joining forces with Phillips Petroleum for explorations in the North Sea, the extent of whose resources were then only suspected. Together with Agip of Italy, the partners acquired the rights to a 5,000-square kilometer area in the British sector. The giant Hewett gas field, discovered in 1967, was shared with the owners of an adjacent block. Gas started to flow in 1969, by which time two other gas fields had been found. In 1965 the Phillips-Petrofina-Agip group acquired exploration licenses for the Norwegian sector. Phillips was the operator and Petrofina had a 30% participation. Success came with the discovery of Ekofisk. Other fields were found nearby, but Ekofisk was, and remains, the richest oil field ever discovered in Western Europe.
During the 1960s and 1970s, the average capacity of a Petrofina refinery trebled. Of the refineries belonging to the companies it had bought, Petrofina closed some and upgraded others. Large, modern plants, such as the Lindsey oil refinery in England, co-owned with Total, were constructed. This rationalization, resulting in a reduction in the number of sites, threatened to increase transport costs. Therefore Petrofina began in the late 1960s to make reciprocal arrangements with other companies. Soon Petrofina, with only four European refineries of its own, was refining in 26 different European locations.
In 1970, Laurent Wolters, who had presided over Petrofina’s rise from its postwar ashes, became chairman. He was succeeded as president and chief executive by Jacques Meeus, the nephew of Laurent Meeus, one of the founders of Petrofina.
Bringing the Ekofisk field into production was the major project of the 1970s. Requiring innovative engineering, it cost 15 times as much as any of Petrofina’s previous exploration and production enterprises. It signaled a move towards processing and marketing the products of the group’s own wells rather than purchased crude.
In 1975, the year that Adolphe Demeure de Lespaul succeeded Meeus, Ekofisk’s oil began to flow along an undersea pipeline to a terminal on Britain’s Teesside. Two years later gas began to be piped to a purification plant at Emden in Germany for distribution to France, Holland, and Belgium. By 1979 11.3 million cubic meters of gas and 17 million tons of oil were coming from Ekofisk.
The shortages following the OPEC oil crisis of 1973 gave Petrofina’s North Sea explorations an additional impetus. The Maureen field was discovered in 1973, and in 1976 a series of exciting discoveries began in T-Block, including the Thelma, Toni, Tiffany, and Treena fields.
At home in Belgium, the 1970s were years of continuing expansion for Petrofina’s petrochemical interests. Drawing on American Petrofina’s plastics expertise, the company achieved total vertical integration right through to consumer goods manufacturing. From 1972, for example, styrene was brought by canal from the Petrochim factory at Antwerp, itself fed by the SIBP refinery, to the Belgochim plant at Feluy, where it was made into polystyrene granules. These in turn were sent to Petrofina’s Synfina site at Manage, to be made into household items such as toys.
In 1977 Petrofina and an Italian partner, Montedison, established a new company, Montefina, into which Belgochim was integrated. Montefina built a plant at Feluy to make polypropylene, a versatile plastic with applications in the automotive industry. A research laboratory was set up on the same site at Feluy, one of the largest plastics plants in Europe.
In the United States too, Petrofina was expanding its petrochemical interests. By the end of the 1970s it had 14% of total U.S. capacity for both styrene and polystyrene, and co-owned Hercofina, one of the largest producers of terephthalates, a primary ingredient of polyester fibers. Raw materials for Hercofina came from the Port Arthur refinery which American Petrofina had acquired in 1973.
In 1972 the group consolidated its paint production facilities into Sigma Coatings, which by the end of the 1970s would have 20 paint factories in Europe, North and South America and the East. In the same year, Petrofina fused its fatty acids concerns, Oleochim and Palmafina, into Oleofina. At first co-owned, this leading manufacturer of glycerines and glycerides later became a fully owned Petrofina subsidiary.
In the 1970s, during the OPEC crisis, Petrofina, in common with other companies, could at times operate neither its fleet nor its refineries at full capacity. In 1977, faced with losses and also with debts incurred to finance exploration and production, Petrofina began preparing itself to weather the inclement market conditions. Refineries were upgraded with the latest equipment. Distribution subsidiaries improved buying and inventory policies to the extent that they showed a profit in the difficult year of 1979. The 1980 investment program was financed entirely from retained earnings.
Oil extraction in Ekofisk peaked in 1980. To recover less accessible reserves, the operators began to inject water into the ground, also mitigating the subsidence of the sea-bed; as a result, the platforms later needed jacking up by six meters. Meanwhile, the Maureen field off the coast of Scotland came onstream in 1983. The purchase of Charterhouse Petroleum in 1986 gave the group extensive new reserves and exploration licenses in the U.K. sector of the North Sea. In 1990, Petrofina bought important North Sea exploration and production interests from Elf and Lasmo.
Across the Atlantic, Petrofina Canada was sold to the Canadian national oil company, Petro-Canada, at the beginning of the 1980s, but Petrofina held a quarter-share in the explorations of Texas Oil & Gas for four years from 1982. In 1988 Tenneco’s onshore production capabilities in Texas, Louisiana, and New Mexico were purchased, doubling Petrofina’s U.S. reserves overnight.
Petrofina sought to compensate for the gradual decline in Ekofisk production not only by exploring elsewhere, but also by improving processing techniques, both in its refineries and in its petrochemical plants. At the Antwerp refinery, where Petrofina bought out BP’s share in 1988, investment enabled more and more products to be squeezed out of each ton of crude, and improved the proportion of petrol and other high- value products to those of heavy fuel oil. Similar investment went on at other refineries, some of which were also equipped to switch production between petrol and propylene according to demand. U.K. and Belgian refineries were modified to produce lead-free or lead-reduced petrol. The Economist, March 14, 1987, credited Petrofina with “some of the oil industry’s most efficient refineries.”
In petrochemicals, too, the emphasis everywhere was on larger, more efficient plants. In 1983 Petrofina bought out its partner in the synthetic rubber factory, and in 1985 it did the same at the ethylene and polyethylene plants at Antwerp, becoming one of Europe’s largest producers of high density polyethylene. Buying a polypropylene plant near Houston, Texas, in 1984, the group acquired 9% of the total U.S. capacity for manufacturing this chemical.
The mid-1980s were record years for chemical sales, but towards the end of the decade Petrofina was hit by falling prices. At the same time there was surplus production in the oil market and a squeeze on refining margins. In the first half of 1990 profits fell 12%, but these problems were expected to be offset by an upsurge in the productivity of Petrofina’s newer North Sea oil and gas interests.
Adolphe Demeure, who had died in 1985, had been succeeded by Jean-Pierre Amory as chairman and chief executive. Amory was in turn succeeded as chairman by Albert Frére in 1990. For the first time since the 1930s, a financier was in charge; Frére was the chairman of the holding company GBL, Petrofina’s largest shareholder. Alongside Frére, Francois Cornelis became CEO.
Petrofina is famous for keeping a low profile: anecdotes have lold of visitors failing to spot the head office, so discreet was the name-plate on its door. With an eye to a listing on the New York Stock Exchange, Petrofina is introducing an element of glasnost. At the same time, it plans to remedy an over-dependence on bought-in raw materials. That it produces only one-fifth of the crude its refineries can process was highlighted as a problem by shortages arising from the 1990 Persian Gulf crisis. However, the resources it does have are geographically spread in a way which reduces risk.
Petrofina’s levelheaded approach has safeguarded the group’s stability through decades of exponential growth. It is renowned for the conservatism of its accounting policy. Activities which do not fit into its portfolio have been eschewed, or, as in the case of coal interests acquired during the 1980s, sold off. Other interests are made as efficient as possible. Prudent alliances with companies whose expertise or resources complemented its own have boosted the company’s growth potential.
Petrofina’s ultramodern refineries can easily comply with the more stringent controls on pollution now being introduced, and can produce their petrol output in unleaded form as required. Now Petrofina is preparing to extend its operations into the former eastern bloc. The rapidly changing world of the 1990s offers exceptional opportunities for the company which, rivals have said, “can turn on a dime,” as described in International Management, September 1970.
Fina (Belgium); Petrochim (Belgium, 99.95%); Fina Raffinadarij Antwerpen (Belgium); Sigma Coatings (Belgium); C.E.A.I. (Belgium); Petrofina International Group (Belgium); Fina Research (Belgium); Fina Europe (Belgium); Deutsche Fina (Germany); Fina Exploration Norway (Norway); Norske Fina (Norway); Fina France (99.99%); Fina PLC (U.K.); Fina Exploration (U.K.); Fina Petroleum Development (U.K.); Fina Nederland (Netherlands); Sigma Coatings (Netherlands); Fina Italiana (Italy); American Petro-fina Holding Co. (U.S.A.); American Petrofina Exploration Co. (U.S.A.); American Petrofina Inc. (U.S.A., 86.52%); Brittany Holdings (U.S.A.); Brittany Insurance (U.S.A.); Montefina, (Belgium, 50%); Finamont (Belgium, 50%); Finaneste (Belgium, 64.96%); Lindsey Oil Refinery (U.K., 50%); U I C Insurance Co. Ltd. (U.K.).
Locquet, Gérard, ed., Contribution à I’his-toire de Petrofina, Brussels, Petrofina, 1980; Dafter, Ray, “The Enigmatic Independent,” Financial Times, November 3, 1983; Smith, Leigh, “Petrofina’s secrets of the deep,” Lloyd’s List, December 18, 1989; Hagerty, Bob, “Frere’s long climb results in a jewel,” The Wall Street Journal Europe, May 4, 1990; Hagerty, Bob, “Petrofina’s Big Holders Expected to Press for More Openness,” The Wall Street Journal Europe, May 7, 1990; Hagerty, Bob, “Petrofina Hopes to Lure U.S. Investors,” The Wall Street Journal Europe, October 22, 1990.