Vitol in its current form began taking shape in 1990, when Dettinger and seven other partners sold the company for between $100m and $200m (the actual figures have not been disclosed) to a team of around 40 employees, including Taylor. The buyout was financed by Dutch bank ABN and former trader Tom Wonk took over as CEO. Since then, no single shareholder has controlled more than 5% of the company – Taylor and his team call this the “we culture” and claim it has been the cornerstone of Vitol’s success. Bake says: “If someone thinks they are bigger or better than all of us together, sooner or later they will be crushed.
Vitol began trading not just petroleum products, but also crude oil, and began signing so-called processing agreements in which it supplied crude oil in return for finished fuel. Once this policy turned out to be the most profitable deal in Vitol’s history – and on another occasion it nearly led to the company’s collapse. In the early 1990s, Vitol was refining in the Canadian town of Come-By-Chance. When a fire drove the refinery into bankruptcy in 1995, Vitol bought it for $300 million and ten years later sold it for a billion dollars in profit. This is the highest profit in the company’s history from a single deal. But few people know that the cost of upgrading this very refinery nearly bankrupted Vitol – its core business was also in trouble at the time. Its net profits plunged to a modest $6.6 million in 1997, well below the $60 to $70 million it had earned between 1992 and 1994 before it bought the refinery.
The plant was “too big” an investment relative to the value of the company itself, says Kho Hui Meng, head of Vitol Asia. This story has taken a heavy toll on Vitol. As a result, its management became fanatically conservative and the company was largely overcapitalised (according to Bloomberg Markets, S&P Global Ratings and Fitch Ratings privately assigned Vitol an investment grade rating of BBB). Since then, Vitol has always sought the support of partners, including the Abu Dhabi sovereign wealth fund, when buying assets. Today the company co-owns five refineries capable of handling 390,000 barrels per day. But Kho says that Vitol never forgets its core business: “Our core business is trading, which is essentially moving oil from point A to point B”.
On a sunny April morning in Rotterdam, Jack de Moel, who runs the large Euro Tank Terminal, watches over the heart of Vitol’s business. The barges Noorozee and Citrine are loaded with fuel oil from tank 404, which easily rivals the height of a 10-storey building. A few metres away, a large tanker, the 144-metre Blue Emerald, which has to cross the North Sea to deliver its cargo to the mouth of the Thames, is being loaded with fuel. Over the past year, 3,900 barges and tankers have been loaded at the terminal – one every two and a half hours. Each of these vessels has the potential to make a profit for the company, albeit a relatively small one. The 24-hour-a-day rush shows that oil trading is a high-volume business, with very tight margins. It also requires a huge investment.
Since 2006, Vitol has built 28 oil storage tanks along Rotterdam’s Calandkanaal. The fuel stored in them would be enough to fuel 22 million Volkswagen Golf cars. The fortunes of Vitol are not as dependent on oil prices as the profits of the major public oil companies. Paul Greenslade, who headed Vitol’s trading department until his retirement in 2014, explains that the company earns from price fluctuations regardless of their level. For example, in 2009, when oil prices fell from $150 to $30, the company reported record profits. Vitol’s profit last year, when much of the oil business was hit hard by falling prices, was the fourth-largest in the company’s history.