Billionaire Klesch eyes new European refinery buy, defying trend

* American businessman set to buy new European refinery

* Klesch set to complete Wales refinery deal in October

By Ron Bousso

LONDON, Oct 3 (Reuters) - Billionaire investor Gary Klesch, about to complete the purchase of a second European refinery, is already looking to his next deal in a sector that others are scrambling to exit.

After buying a struggling refinery in Wales in July, the American entrepreneur who made his fortune through investments in distressed European businesses expects to add a third European plant to his portfolio within months.

Klesch raised eyebrows when agreeing to acquire the Milford Haven refinery, Britain's smallest, a deal that closes this month. Europe's ageing refining industry has been caught between declining demand and increased competition from state-of-the-art overseas operations, forcing a wave of closures over the past years.

Still, more than 10 medium-sized refineries need to shut down by 2018 in order to balance the market, according to analysts. Murphy Oil's 135,000 barrels per day Milford Haven plant had been singled out at a candidate for closure as its location on the far west of the British Isles places it far from large demand centres.

But the 67-year-old head of the Geneva-based Klesch Group insists that his austere, tightly-run model can turn around the once loss-making plant and succeed where bigger but less nimble oil majors often fail.

"In 99 percent of my business it's tiny steps that lead to giant steps," he said, referring to a "merchant model" which is stripped of many restrictions larger companies face.

Born in Cleveland, Ohio to a boxer father and educated by Jesuits, Klesch started his professional career at local investment bank McDonald & Company. He then went to the U.S. Department of Treasury, which he followed with several positions in investment firms before setting up in 1990 the Klesch Group, which owns assets in around 15 countries with revenue of around 5 billion euros ($6.3 billion).

Klesch says the Heide refinery in northern Germany, which he bought from Shell (LSE: RDSB.L - news) in 2010, is today highly profitable. He expects to acquire another European refinery "in the coming months", he told Reuters in an interview.

"Do we have a game plan or a playbook? Of course we do, but that game plan is worth a lot of money," Klesch quipped, sitting in a conference room in his company's west London offices.

He declined to provide specifics on the location or owner of the refinery.

Shell, Total and Italy's Eni (NYSE: E - news) , Europe's largest refiners, are all reviewing their refining businesses.

Unlike the oil majors, which have integrated supply systems and a long chain of command, Klesch said he can buy the cheapest available crude oil, which is then processed into fuels such as gasoline, diesel and aviation fuel.

Klesch chose to buy the Milford Haven refinery without its retail system of hundreds of petrol stations across Britain, which were sold to Motor Fuel Group. This way, he said, fuels can be sold at the best prices in the market, and not into its own system.

"One of the benefits of the merchant model is that it gets rid of a lot of luggage... I don't have to worry about upstream and I don't have to worry about retail. I am agnostic." (Editing by Michael Urquhart)