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$20M deal restarts Chevron site
By Dan McCue
Staff Writer
Delfin Group USA wasn’t looking to establish a manufacturing beachhead in North Charleston.
But when the perfect opportunity arose at the Chevron Corp. property late last year, the Russian petroleum firm had no choice but to jump at it, said Tony Williams, who orchestrated the $20 million deal on the parcel for the company.
“What a nice piece of property,” said Williams, a Delfin Group USA vice president, recalling his reaction on his first visit to the shuttered Chevron plant on Virginia Avenue.
“I can honestly say that in 30 years of looking at facilities for sale, I’ve only seen one I thought was better, and that was several years ago in Antwerp, Belgium, and largely due to the fact that logistics in Northern Europe are so phenomenal.”
Delfin Group Russia, formerly Luxoil, has operated plants in Moscow and in Riga, Latvia, for decades, but it was only 16 months ago that Marcos Bagdasarian, a Delfin principal,
established a North American division in Atlanta.
Enlisting Williams, a 30-year veteran of the oil and lubricant industries and a native of Manning, S.C., as his vice president, Bagdasarian wanted to simply set up a U.S. purchasing office.
Williams, however, came with an expertise in land deals and managing international operations. His background included founding Global Alliance, a firm that managed three lubricant mixing plants in South America.
Finding the perfect location
In 2007, the two had been scouting sites near Atlanta and Savannah to establish a scalable production facility, ideally with a rail connection.
While searching, Williams and Bagdasarian received a call from a real estate agent they knew who had the “perfect” location for them in North Charleston.
The Virginia Avenue property, which has changed hands numerous times over the past several decades, and which most recently went on the market in June for an asking price of $26 million, is expected to be operational by February, Williams said.
The site had been in use as a service station or lubricant oil terminal since 1910.
Delfin plans to ship raw oils and additives to the facility, where they will be mixed, bottled and prepared for sale to automotive, commercial and industrial users. The product will then be shipped out to its principal markets of Europe and West and North Africa, and the Asian Pacific rim.
At full production, the plant is expected to manufacture 10 million gallons of petroleum products annually and employ between 120 and 170.
A fast-tracked deal
According to promotional materials provided by Colliers Keenan Inc., the Charleston-based industrial brokerage which handled the sale, various affiliates of Texaco Inc. owned the site between 1910 and 1998, when it was transferred to a joint venture between Texaco and Shell Oil Co. known as Equilon Enterprises LLC.
In 2002, as part of the merger between Texaco and Chevron, Texaco sold its interest in the joint venture to Shell. Later, Chevron USA purchased the property as part of its deal with Texaco, but decided not to restart petroleum operations at the site, and more than 70 jobs were eliminated.
In June 2007, Chevron selected Colliers Keenan and charged the company with selling the property by the end of the year.
Several elements made the site attractive to Delfin Group USA, said Hagood Morrison, who handled the sale with Amanda Kitchen, also of Colliers Keenan.
These included the site’s deepwater access on the Port of Charleston’s 45-foot shipping channel; three rail spurs linking the site to both Norfolk Southern and CSX rail service; and the site’s easy highway access. Also attractive was the fact an on-site maintenance crew had kept the facility operationally ready even after the plant closed in late 2006.
The brokerage firm received more than 15 offers for the site, with marketing efforts resulting in more than 50 visits to the facility by prospective buyers, Kitchen said.
Much of that interest, Morrison said, came from producers of alternative fuels. At the end of the day, however, “the group which closed was in a similar business as Chevron — lube-oil blending and distribution.”
Cost, skill critical factors
Profit margins are slim in the lubricant and oil-based products industry, Williams said. Manufacturers must produce vast amounts to see a profit, and must pay close attention to logistics, pricing and the currency markets, Williams said.
“As we’ve grown and begun to serve more international markets, it has made less and less sense to reach those new customers from Moscow, which is landlocked and requires that our products be loaded for overland transport, then transferred to small ships, and finally, transferred to larger, ocean-going ships,” he said.
“And of course, every time you move the container from one mode of transportation to another, that adds a significant additional cost. On the other hand, if you’re located in a Charleston, a Savannah or a Jacksonville, all of a sudden, things start to make sense from a logistics standpoint.
“Being adjacent to a deep-water port and having a network of highways close at hand enhances our competitiveness by lowering the cost of transporting raw materials into our facility and also getting our goods from the factory to our customer.”
Since the North Charleston property had not been mothballed, much of Delfin’s initial work there simply involved bringing existing production systems back online, Williams said.
Williams has been focusing on first-stage hiring efforts and this month met with 20 former
workers at the facility to see if they would like to get back in the oil business.
“We hope to recruit many of the key people who worked at Texaco and ChevronTexaco and weren’t absorbed into the company when the plant closed down,” Williams
said.
The biggest change to the facility, and the reason that the projected number of employees is so much higher than when the plant was last operational, will be the addition of equipment to mold the plastic bottles into which the lubricants and oils will be poured.
“Chevron contracted that job out, but our goal is to have much more of a vertical integration of processes here,” Williams said.
Dan McCue is a staff writer for the Business Journal. E-mail him at dmccue@setcommedia.com.
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