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20 May 2008
When a major global energy group sought to divest one of their Oil Refineries in the UK, they turned to Chaucer Consulting to help smooth the way.
Refining the Future
When a major global energy group sought to divest one of their Oil Refineries in the UK, they turned to Chaucer Consulting to help smooth the way. “The site had just undergone a refurbishment and was in a very good state, so it was a good time to sell,” says Arifa Chakera, a Senior Consultant at Chaucer. “It’s been making money and people were aware of the interest in the business.”
Chaucer stepped up to offer services to their client. “I was in the right place at the right time – I was already in the refinery doing other work with management,” she says. Arifa Chakera noticed enquiries were being made about selling the refinery, so she helped the global energy group and its management to put together a proposal for selling the site. “The refinery itself had previously had no involvement with Chaucer’s rigor and discipline in the area of mergers and acquisitions, although the clients home office was very familiar with it,” she relates. “However, the refinery personnel had already been working with Chaucer on other matters, so we had built up trust between us, and we were able to use Chaucer’s experience to help produce the proposal.”
Chaucer got to work with the refinery management. “the global energy group was bringing buyers to the refinery, so we worked with the managers there to define what to cover and how to best sell the refinery, in order to give them an honest and realistic presentation,” Arifa Chakera notes. “After all, we were not only selling the refinery, we were selling the people as well.”
The teams also went into possible buyer outcomes of the sale, as at the time there was no definite buyer for the site. “For example, if a bank bought the refinery, there was no background in refining, and that would require a certain set of moves by management,” she notes. “A big refining operation might just buy the refinery and absorb certain functions, or a smaller company might need us to do more. We looked at what was best, and what was ideal and not ideal.”
The Big Issue
Chaucer and the Refinery Management also began to look at the business, and see where the refinery relied on the global energy groups central offices for its existing systems. “We went through all the functions of the refinery, and it turned out to be 400 items,” she says. “We put them on a spreadsheet and called it the ‘Big Issue’. These items needed resolution, and listing them gave them clarity.”
The initial completion date was planned for December 2006, and discussions began in August 2006 with buyers. “At that time, we could make assumptions but not decisions. The question was how to disconnect from the global energy group, what areas to move in-house, and whether to use the global energy groups policies and procedures.”
The answer was to trim down the 400 items, Chakera says. “For example, we moved some of our clients-centralised contracts in-house to the refinery, so that they are now local contracts. As a result, we reduced the 400 items that were central to the global energy group, to 150 items, ready to discuss with the buyers. It made people’s lives a lot easier at the initial discussions.” It also made an impression on potential buyers, including the final buyer, one of Europe’s leading independent refiners and wholesalers of petroleum products “We got really good feedback from the buyer,” she notes. “They were impressed that a lot of the fact-finding had already been done by Chaucer prior to the sale.
As a result, they bought the refinery in four months, versus the one year they had spent buying a previous refinery in Europe. We had already done half the work for them. They could just go to our central Programme Management Office (PMO) and any issues they had already had a solution.” At its peak, there were three Chaucer consultants working full-time on the integration team, and another consultant full-time and one part-time working for procurement.
Talking Helps
Communication skills were very important on all sides, in order to align the three parties – the global energy group, one of Europes leading independent refiners and the refinery. “What would often occur is that it would appear that the different parties would have different goals and concerns, and they might not understand what the other party wanted,” Arifa Chakera says. “But we made them understand that they all wanted the same thing, and were on the same side – they were just asking for it in a different way.”
Part of the reason behind this was the difference in the companies’ sizes and scale. The leading independent refiner is a relatively new, small operation, with only around 2,000 people in total. Meanwhile, the global energy group is a corporation of 97,000 people. Decisions sometimes take longer to obtain from this group as a result of the sheer size of its operations.
Communication came to the fore in many other areas, notably when looking at payroll, Arifa Chakera says. One of the primary challenges was to make sure that people got paid on day one of the new ownership. The global energy group was going to disconnect that first day, and the new company payroll had to be in place and all the financial software. This required reprioritizing some people, and getting the IT departments communicating with everyone. “We sorted this out by having weekly meetings, and complete open communication via a central portal Chaucer set up,” she says. “That way, anyone could go to the portal, and knew they’d get an honest answer – sometimes not the answer they wanted, but an honest one so they could plan.”
Nothing is Problem-Free
No project ever goes completely smoothly and this one was no exception. “One of the issues we faced was that a few groups went looking for a solution a bit early – they chose the solution they wanted and spent time, effort and money working on assumptions, before the sale was completed and we knew who was buying the refinery,” Arifa Chakera relates. “For example, money was spent on new financial accounting system implementation, when at the time there was no idea as to who the buyer was. But the assumption was made and things went so fast, and in the end it had to be reworked.”
However, the few glitches aside, the payoff was when the refinery divested and moved to one of Europe’s leading independent refiners smoothly. “Most of the project went very well. The PMO ensured the right stakeholders, change implementers and users all knew what was going on and when it would happen. Sometimes we had to play devil’s advocate, but it was a good challenge, a lot of hard work and late nights.”
These results continue to pay off for Chaucer, as the leading independent refiner is also interested in working with Chaucer consultants on projects in the future.
Panel
Refinery Profile
370 acre site
Opened in 1953
Employs more than 540 people plus contractors
Refines 172,000 barrels of crude (33 million litres) per day