Branson may build oil refinery to cut costs
By Rebecca Barr And Lynne Marek, Bloomberg News
June 24, 2005
U.K. billionaire Richard Branson is considering building an oil refinery to help relieve a shortfall in processing that's boosted fuel costs for his Virgin Atlantic Airways Ltd. business.
Branson's closely held Virgin Group Ltd., which controls Virgin Atlantic, will decide in two to three months whether to build a refinery after a study, Branson said Thursday.
The lack of spare refining capacity has contributed to record prices for the crude oil used to make jet fuel, the cost of which has soared by 65 percent over the past year, based on prices for delivery in New York harbor. Fuel is the second-biggest expense for most airlines after labor.
"I've been considering building an oil refinery because there's an enormous shortage of oil-refinery capacity and, as an airline owner, the more oil-refinery capacity that can be created, hopefully, we can drive prices down," Branson said.
There's a 50-50 chance of proceeding with construction, estimated to cost $1 billion, Branson said. Other airlines might consider joining the project, he said.
Virgin Atlantic could spend an extra $109 million on fuel this year because of rising prices, Chief Executive Steve Ridgeway said Wednesday.
There's little likelihood of a retreat in oil and fuel prices as growing economies in Asia put added pressure on supplies, Branson said.
"It does feel like with China expanding so rapidly and India expanding so rapidly that oil prices could stay up for some time to come, if not indefinitely," Branson said. "Airlines are going to have to adapt to a new world."
Virgin Group has brought in outside experts to participate in the study, Branson said, without naming any of the consultants. No partners have been lined up for the possible project, he said.
Asked to identify a potential location for the refinery, Branson would say only that refineries aren't popular among their neighbors. In the U.S., a new refinery hasn't been built in 29 years.
"People don't like oil refineries built around them because they're ugly things and they're maybe not the most environmentally friendly things to have on your doorstep, but we're looking at it," he said.
The last refinery built in the U.S. was Marathon Oil Corp.'s Garyville, La., plant, which opened in 1976.
Environmental regulations have discouraged construction of new refineries in the U.S. by driving up costs, Bruce Burke, vice president for refining at energy consultant Nexant Inc. in White Plains, N.Y., said.
http://www.rockymountainnews.com/drmn/busi...MN_4_3878905,00. html
By Rebecca Barr And Lynne Marek, Bloomberg News
June 24, 2005
U.K. billionaire Richard Branson is considering building an oil refinery to help relieve a shortfall in processing that's boosted fuel costs for his Virgin Atlantic Airways Ltd. business.
Branson's closely held Virgin Group Ltd., which controls Virgin Atlantic, will decide in two to three months whether to build a refinery after a study, Branson said Thursday.
The lack of spare refining capacity has contributed to record prices for the crude oil used to make jet fuel, the cost of which has soared by 65 percent over the past year, based on prices for delivery in New York harbor. Fuel is the second-biggest expense for most airlines after labor.
"I've been considering building an oil refinery because there's an enormous shortage of oil-refinery capacity and, as an airline owner, the more oil-refinery capacity that can be created, hopefully, we can drive prices down," Branson said.
There's a 50-50 chance of proceeding with construction, estimated to cost $1 billion, Branson said. Other airlines might consider joining the project, he said.
Virgin Atlantic could spend an extra $109 million on fuel this year because of rising prices, Chief Executive Steve Ridgeway said Wednesday.
There's little likelihood of a retreat in oil and fuel prices as growing economies in Asia put added pressure on supplies, Branson said.
"It does feel like with China expanding so rapidly and India expanding so rapidly that oil prices could stay up for some time to come, if not indefinitely," Branson said. "Airlines are going to have to adapt to a new world."
Virgin Group has brought in outside experts to participate in the study, Branson said, without naming any of the consultants. No partners have been lined up for the possible project, he said.
Asked to identify a potential location for the refinery, Branson would say only that refineries aren't popular among their neighbors. In the U.S., a new refinery hasn't been built in 29 years.
"People don't like oil refineries built around them because they're ugly things and they're maybe not the most environmentally friendly things to have on your doorstep, but we're looking at it," he said.
The last refinery built in the U.S. was Marathon Oil Corp.'s Garyville, La., plant, which opened in 1976.
Environmental regulations have discouraged construction of new refineries in the U.S. by driving up costs, Bruce Burke, vice president for refining at energy consultant Nexant Inc. in White Plains, N.Y., said.
http://www.rockymountainnews.com/drmn/busi...MN_4_3878905,00. html
