Comments

Well lets hope so, Branson is an easy guy to support because despite being an icon of multinational business, he has a certain 'underdog' appeal.

His actions seem to be carried out in the greater public interest.

And I suppose it's basic economics, the more players there are in the market, the lower the price will get (perhaps, hopefully).

Posted by mark at September 20, 2005 6:21 PM

Well, sure... with a lot of money and a good dose of talent

In order to build a refinery, you need a good EPC (Engineering, procurement and construction) contractor. The technology needed can be bought from a number of global giants - Shell, Dow, ABB Lummus to name a few.

You need to get adequate supplies of crude, and a team that can buy crude efficiently.. (which I've been informed is more art than science)

There are tons of people in the UK, Ireland, India and the Middle East who could start up and run the refinery.

The tough part is distribution.. To be successful as a refinery, the size of the refinery has to be of enormous capacity. There is only so much that Virgin airlines can consume on it's own.. Besides Airplanes run on crappy fuel - a mix that's like kerosene. The major margins on fuel are made on gasoline, diesel and so on.. which airlines can't consume. So he needs a strong partner who will invest in petrol stations, or an existing player to buy the fuel from him. In Europe (or rather in the Netherlands), it's almost impossible now to get permission from local authorities to build petrol stations. He might have better luck in the US and Asia.

Dhirubhai Ambani and his sons in India successfully backward integrated from selling polyester blend clothing to petroleum products to oil refining to oil exploration. The company he founded is called Reliance, one of India's best run companies. They've now branched into several other industries as well.

So it's possible to make this work for Branson.

Posted by Arun Sadhashivan at September 21, 2005 12:22 AM

Arun,

I agree with you only to the extent that Shri Dhirubhai Ambani had created a wonderful enterprise called RELIANCE but am afraid & as u r aware, RELIANCE has now been split between the Ambani brothers (Mukesh ultimately getting the larger share of the pie by virtue of being the older bro!) and looks like the ADAE - Anil Dhirubhai Ambani Entp(group of cos' owned / controlled / managed by Anil) is yet to prove its mettle.....and who knws maybe there culd be another IPO in the offing...jus to make Anil personally well off than Mukesh!!.....That being said, Shri.Dhirubai Ambani was TRULY a visionary & a legend during his times and WILL DEFINITELY be remembered for:-
a) The wealth he has created
b) Making RELIANCE one of the Best Managed companies in the country (INDIA)
c) For not bequeathing the will - i.e. intestate which ultimately led to the split between the brothers & one hellova tussle & rough patch for the world to witness...ultimately i bet the MEDIA did one hellova job narrating the ghastly episodes in entirety!

Posted by K.Sriram at September 21, 2005 12:52 AM

Watch this space!! - Anything is possible with Richard Branson. I hope we Brits all support the great man. Sir Richard has that wonderful and almost unique quality of remaining refreshingly 'ordinary' and firmly rooted in reality as traditional management institutions try desperately to make him conform to what I call 'dull speak.' He speaks such simple common sense it is so refreshing. As a leader he is a role model for all and by the way I bet there is not an MBA in sight on his CV.

Posted by Trevor Gay at September 21, 2005 2:04 AM

I am afraid "conmsumer champion" is a very wrong label for this guy.

Have you ever travelled on one of his trains? Or dealt with his bank?

We should also not ignore the that working conditions for his employees are said to be pretty nasty, too.

Posted by ingo at September 21, 2005 2:40 AM

Yep Ingo I regularly travel on Virgin trains and they are approximately 1000% better than the competitors in my expereince - sure they are not perfect but they are getting better all the time. I haven't dealt with Virgin bank but I have flown on Virgin planes and never had cause to complain. I don't know anything aobut the staff conditions but I use the Virgin Gym in my local town and the staff there are brilliant - they also seem very motivated. We all have different perceptions of quality and I genuinely respect what you say - my experience of Virgin has been excellent so far :-)

Posted by Trevor Gay at September 21, 2005 3:16 AM

The problem will be the infrastructure costs. Their are only 5 refineries in the UK, spread geographically around the country. These are linked to terminals located in most major urban areas via underground pipelines which reduce the distribution costs dramatically.

Nb, All UK Oil companies purchase each others product because of this, ie the BP refinery is in Scotland, therfore regardless of the petrol station branding in Scotland the fuel will be from the BP refinery. Esso in the South East etc.

Branson's problem would not be selling his product but distributing it effectively. Pipelines will have to be built to oil terminals. This would present a major barrier to enter into this market.

Posted by Mark Wilkins at September 21, 2005 5:13 AM

This is just an example of vertical integration that could repay itself early as an investment through selling excess fuel to other players. I suspect that in the future we could also see Virgin petrol stations. A point that I have not seen mentioned is where will this facility be located? That could have a big impact on the initial cost of investment and any savings generated as a result. With UK oil supplies dwindling, I suspect that the location will be elsewhere.

Posted by Simon Paul at September 21, 2005 7:16 AM

Branson is just the guy we need to get some more refining capacity available. I totally support the idea, since no one else seems to be able to get the job done. When he puts his mind to a problem, it usually gets solved.

We could have all the crude oil in the world but with no refineries....no gas.

Cheers

Posted by Karen Sieczka at September 21, 2005 8:04 AM

Yes to Branson and his dreamweaver lifestyle - especially when it concerns big oil and the way they rip us off consistently with their record profits!

Luckily I'm able to have a home based career ... so oil energy consumption is minimal! Stay radical out there - run/walk!

Posted by Sean at September 21, 2005 8:46 AM

We seem to have a variety of reactions here, both pragmatic and emotional.

Looking at the pragmatic first, I think one of Branson's great skills is that he doesn't try to be an expert himself, he goes out to find people in the know who have the same mindset as he does. The article from the Guardian says that is precisely what he is doing in this case - and this team of experts will no doubt have a good grip of what the realities of this market opportunity. Like a number of respondents here, I really hope he can pull it off!

I do have to react to the rather stinging comment about his existing companies. I actually have a Virgin Bank Account (known as a One Account) and I am not only happy with it, I am delighted. It's a fabulous product and the service is great. And as someone who has worked as a consultant to Virgin companies, I have yet to come across an employee who felt the Virgin approach to them was pretty nasty. Like Trevor, my experience has always been positive. I know that they have a policy of paying the market rate, not higher, but they continue to be a very popular employer with job applicants. It seems they don't need to pay over the odds for the well motivated people they are able to attract.

Posted by Madeleine McGrath at September 21, 2005 9:31 AM

Aw, shucks, and I thought you was gonna write about Branson Missouruh. Y'all ever been to their Mel Tillis theater there?

Posted by Ron at September 21, 2005 9:56 AM

I think that people hold the impression that retailing Petrol & Diesel is profitable. The margins are extremely low, only a few pence per litre. Most small - medium service stations make more money from their other retailing activities ie confectionary etc than from the fuel sold.

The petrol retail market is dwindling with all major players reducing the number of service stations, in part due to the very small margins and the huge volumes required to make anything substantial. This is in conjunction with supermarkets selling petrol & diesel as a loss leader.

It would be strange move for any new players, even Richard Branson to enter this market!!

The oil majors make their huge profits from refining and then effectively selling the product to themseleves, together with other independant oil companies.

Posted by Mark Wilkins at September 21, 2005 10:45 AM

I think this is a great move. All it takes is money and he doesn't even have to sell his refined fuel to anyone besides Virgin to realize a profit.

As for poor working conditions for employees...people choose their employment and what this man is doing, is creating employment. Adds value to the company, adds value to the economy.

Brilliant.

Posted by Josh at September 21, 2005 3:52 PM

Let's hope that he does make a success of his refining venture. I've used the trains, bought the records and spent money in his shops too.

Even my email's from Virgin and whilst there were problems with spam around 18 months ago, I've stayed with it and closed my Yahoo! and Hotmail accounts that I used to use whilst travelling.

Branson's an astute businessman and it's been interesting to hear what employees have said about him. I interviewed legendary radio DJ Tommy Vance before the launch of Virgin Radio and one of his comments about working for a Branson company was that it was 'staffed by people who do give a s**t'...

Posted by Keith Rickaby at September 21, 2005 4:42 PM

Sean - think you and I can start a campaign to persuade Branson to put his drilling project off the coast of Santa Barbara, California, or in the ANWR wilderness of Alaska?

I love you man.

Posted by Ron at September 21, 2005 4:47 PM

Virgin is a powerfull brand. If anyone can take on the oil giants its Branston. He may not win the fight but will surely change the way we see Oil companies as I'm sure he will reveal a few trade secrets if he does go ahead.

Posted by Andre Googe at September 23, 2005 5:05 AM

Cool! That is sure to give the term "Virgin Oil" a brand new meaning .. Simon Paul comment on Virgin Petrol Station sure sounded like another good channel to market the other Virgin products .. Virgin Cola / Virgin Banking / Virgin Music ..

However, hope he remembers his failed attempt to penetrate Singapore's mobile market with his Virgin Mobile venture. Anyway, it was a tough market here for the mobile market. Since there are only 4 Mil S'poreans and that includes foreign workers. In addition, the market is dominated by 3 Telco Operator with deep Govt links ..

Watever it might be .. I really wish Sir Branson all the best .. he is an entrepreneur that I deeply respect ..

Posted by Edmund at September 25, 2005 3:09 PM