(Bloomberg) -- Vitol Group named Russell Hardy as chief executive officer, replacing Ian Taylor at the helm of the world’s biggest independent oil trader.
Taylor, an Oxford-educated trader who led the firm for more than two decades of impressive growth, will remain chairman. Under his watch, Vitol expanded like a Silicon Valley success story, increasing net income from $22.9 million in 1995 to a record $2.28 billion in 2009.
The move finally settles the succession questions that have loomed over the company, although Hardy’s ascension grew more likely last year when he was appointed Vitol’s CEO for Europe, the Middle East and Africa. A chemical engineer by training, Hardy joined Vitol in 1993 and has been a member of the company’s executive committee since 2007.
Despite the obvious success of Taylor’s tenure at Vitol, which now trades more than 7 million barrels of crude and petroleum products a day, the new CEO faces significant challenges. There are growing signs that the commodity-trading industry’s best days are in the past as increased competition, greater transparency and the digital flow of information are shrinking profit margins.
Rotterdam-based Vitol was founded half a century ago by a pair of Dutchmen and under Taylor, has aggressively expanded its operations worldwide, with main trading floors now located in London, Geneva, Singapore and Houston. The company plays a crucial role in global energy markets, buying, selling, blending and transporting oil, gas and coal around the world. It has long-standing relationships with national oil companies, refiners, producers and end users. Over half a century, Vitol has never suffered an annual loss.
Along with Glencore’s CEO Ivan Glasenberg and Trafigura’s late co-founder and former chairman and CEO Claude Dauphin, Taylor is widely regarded as a pioneer of global commodities trading. He started at Royal Dutch Shell Plc in 1978, where he learned oil trading through stints in Singapore and Caracas. He first joined Vitol in 1985 and became CEO 10 years later.
Under the leadership of Taylor, who fought cancer a few years ago, Vitol enjoyed commercial success amid surging oil demand and roller coaster energy markets. Its employees, who are also the firm’s shareholders, were rewarded handsomely. Over the last decade alone its 350 top employees received a total of $7.5 billion in payouts, according to corporate fillings.
Vitol increased its equity value by 3,500 percent, from $278 million in 1996 to about $10 billion at the end of 2016. Over the same period, Glencore, the world’s largest commodities trader, went from $1.2 billion to $35 billion, a smaller though still impressive 2,800 percent rise.
Taylor refused to follow Glencore’s path and become a public company, keeping the firm private despite numerous conversations over the years about a potential initial public offering, or selling the business to others, including at one point to now defunct Enron.
Amid Vitol’s soaring growth and profits, Taylor remained at the front lines of the firm’s day to day operations. In 2011, in the midst of a raging civil war in Libya, Taylor and another top executive, Chris Bake, flew into Benghazi to personally negotiate a deal to supply fuel to rebels fighting against the 42-year dictatorship of Colonel Moammar Qaddafi. Vitol would be paid in crude oil.
The agreed deal went awry with in days as Qaddafi’s forces blew up a key pipeline. Still, Vitol and Taylor kept up their end of the bargain and were eventually repaid in full.
The outgoing CEO took his most damaging reputational hit in 2007 after allegations Vitol paid about $13 million in “surcharges” to the regime of Saddam Hussein to secure oil shipments. An investigation led by Paul Volcker, the former U.S. Federal Reserve chairman, exposed a world of illicit payments, secret bank accounts, and diplomats for hire. Vitol pleaded guilty in the Supreme Court of the State of New York.
Beyond his role in global commodities trading, Taylor is well known in the U.K. as a pro-European and big donor to the Conservative Party, which has led the government since 2010. Last year, he declined a knighthood amid controversy related to his support for the failed campaign for the country to remain in the European Union.
By choosing Hardy as the new CEO, Vitol passed over the oil trader’s other top managers including Mike Loya, who heads the company in the Americas, and Kho Hui Meng, head of Asian operations. Both are close in age to Taylor, who is 62. David Fransen, another Taylor contemporary, stepped down from the position of managing director in Switzerland and a member of the firm’s management board last year, but remains chairman of Vitol’s Swiss unit.
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