Published September 29, 2025 in Energy • 15 min read • 
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Dev Sanyal was appointed CEO of VARO Energy Group in January 2022. The 10-year-old Swiss-based company was a mid-sized player in the European energy industry, two-thirds owned by the private equity giant Carlyle and one-third owned by Vitol, the world’s largest energy trading house. It had a dominant conventional fuels business covering the value chain from sourcing, manufacturing, and blending to trading and distribution. Mindful of the future, it had also made early inroads into the renewables space, capitalizing on the energy transition momentum in the EU.
The energy industry had been experiencing a convergence of policy conviction and technological advancement in clean energy. Since the early 2010s, solar photovoltaic costs had fallen by 90%, onshore wind by 70%, and batteries by more than 90%. The corporate narrative was evolving, too. Mark Carney (the UN’s Special Envoy for Climate Action and Finance at the time) highlighted climate change as an existential threat and called for economies to move to net zero as quickly as possible. Many of the world’s largest corporations subsequently committed to future net-zero emissions targets guided by the UN Sustainable Development Goals. Furthermore, the Russia–Ukraine conflict heightened global attention on the instability of energy security and the imperative to transition to sustainable energy.
Within this context, Sanyal’s mandate was to lead VARO into its next growth trajectory. The board expected Sanyal and his top management team to formulate a strategy that would be economically attractive, socially acceptable, and politically relevant.
Energy companies face a strategic balancing act: they must sustain profitable conventional energy operations to fund their transition and invest decisively in green energy to remain competitive and compliant with emerging environmental expectations. The timing, scale, and integration of these investments are critical factors that shape their future viability.
Due to the growing demand for energy worldwide, VARO’s strategy was anchored in the concept of energy addition as well as energy transition as the way forward. “The world is the way it is, not the way we would like it to be,” said Sanyal. “Energy demand has grown for the last millennia, and this is simply a story of economic prosperity. The question is how we provide the energy that customers need in the way that they want. We can’t make a one-dimensional bet. History teaches us that. We therefore need to diversify the business.”
In line with this thinking, VARO launched the ONE VARO Transformation strategy in July 2022 to address the twin engines of the energy security and energy transition needs of its customers. The strategy aimed to triple earnings before interest, taxes, depreciation, and amortization (EBITDA) by 2026 and invest around $4bn over the 2022-26 period, with two-thirds committed to sustainable energies that would account for over 50% of group EBITDA by 2026. The twin-engine strategy included:
Given the uncertainties in the pace and direction of the energy transition, the twin-engine strategy allowed VARO to develop a diversified portfolio that offered customers greater flexibility and aligned with societal and governmental expectations. A potential downturn in one engine could be offset by an upcycle in the other, ensuring stable execution of strategy while enabling VARO to manage risk and capital flows more effectively.
The challenge, however, was to manage the overall exposure and complexity across conventional and renewable energies while creating value for multiple stakeholders.
Three years into its strategy implementation, VARO can lay claim to significant progress. Once little-known, it is poised to become a $100bn company by revenues, the second largest renewable fuel producer in Europe (and one of the top five globally), and a major refiner and trader, serving over 50,000 business customers across 33 countries. This has been made possible by its 2025 acquisition of Preem, one of the largest renewable fuel producers in Scandinavia, which provides over 40% of Sweden’s and around 25% of Scandinavia’s energy needs for transportation. While this acquisition was an obvious strategic win in meeting its transformation goals, we have identified five key principles that have underpinned VARO’s success in driving its own energy transition.
Top management teams are charged with determining strategic choices and securing the “right to win” in a new space. To do so, they need to demonstrate credibility based on distinctive capabilities, capital, and passion to deliver on the proposition.
At VARO, the strategic choice was between molecules and electrons. Sanyal and his top team clarified that the company could potentially win in molecules, where they possessed end-to-end value chain expertise in conventional energy. CFO Georges Menane emphasized, “What we know how to do is the value chain – from the well to the wheel. We are good at building the various elements of the value chain so that, overall, we secure competitive advantage in the cost and the flexibility with which we bring molecules to customers.” Biofuel or biogas, for example, would require building on the existing value chain, except that the feedstock was not from the oil well but from agri-waste. The structures, processes, and tools for biofuels could be replicated from existing capabilities and know-how. This opened the door for new acquisitions, partnerships, and commercial agreements to manage the risks across a value chain that VARO was well-versed in.
The company also believed that biofuels were ideal for energy addition: it could reduce emissions by 80-90% and drop in to existing fuel usage, enabling efficient adoption from an infrastructure perspective. These aspects would be attractive for the EU as it sought to speed up the energy transition. Gilles Vollin, EVP of Integration and Capability, said, “We believe that we have the right to win with biofuels because we have the know-how in molecules, we have the infrastructure, and we know how to distribute to customers without requiring the need for change in infrastructure.”
VARO took a full value chain perspective to expand on its existing activities. For example, the company had a strong biogas trading business through a company that it acquired, RES, and a customer franchise around it. It integrated upstream capabilities by acquiring a biogas manufacturer, Bio Energy Coevorden, and investing in it to double the production capacity, establishing one of the largest biogas facilities in Europe. As the New York Times noted in its story on VARO Biogas, it was “a company of traders and engineers”. Throughout, it focused on operational efficiency to position itself as the most efficient price setter in the market.
While it is relatively straightforward for leaders to determine the strategic choices that a company should pursue, it is considerably more difficult to define what it will not do. Debates around opportunity costs, jeopardizing growth prospects, and the risk of disappointing stakeholders complicate decisions on what to forego. For VARO, distilling the discussion to the level of electrons or molecules provided strategic clarity. The leadership team acknowledged that VARO did not have the fundamental right to win with electrons and, therefore, decided not to venture into offshore wind energy production. “You don’t want to end up with a white elephant,” explained Sanyal. “The idea that you can build an unaffordable source of energy that will become affordable in the future is a conceit. A white elephant will always remain white.”
Previously, the acceptability aspect of new energy was the lens through which decisions were made by governments, financiers, investors, and corporations to drive the energy transition. For example, oil majors started redeploying capital from fossil assets toward more “acceptable” green energy sources. However, in the wake of the Russia-Ukraine conflict, instead of acceptability, accessibility to energy security became paramount for governments. Simply put, electric jet fighters or electric tanks do not exist. Defense equipment still needs to be fueled by conventional energy. Governments were also anxious about fueling key infrastructure such as roads, marine, aviation, railways, and industrial sectors. At the core, there remained the question of the affordability of new energy sources. Europe had a unique opportunity to recalibrate and accelerate in terms of 1) framing policies to enable the desired end goal of the energy transition, 2) developing mechanisms for demand creation, permits, and incentives with faster cycle times, 3) enabling cross industry collaboration – minerals, agriculture, energy, and 4) maintaining stable regulations to create investment opportunities.
Within this acceptability-accessibility-affordability triad, VARO focused on the middle path: brownfield developments. This would enable the company to secure a license to operate from economic, social, political, and ethical perspectives. Unlike the coal transition that often left behind ghost towns, a brownfield development is built upon existing infrastructure and capabilities, extending the lifespan and livelihood of people, businesses, and towns dependent on the “old”. This aligned with government priorities by mitigating the impact on communities arising from the closure of, say, a corporate oil refinery. “From a sustainability point of view, it’s much better to adjust and repurpose an existing asset rather than abandoning it and forgetting the past,” said Menane. “Brownfield projects also typically entail lower technological and financial risks compared to completely greenfield developments.”
VARO decided to invest in 1) the decarbonization of its oil refining assets and 2) building “Engine 2” projects on existing sites. In 2023, it partnered with the Swiss utility, Groupe E, to launch Switzerland’s largest ground-mounted solar power facility (spanning 47,000 square meters, comprising 19,000 photovoltaic panels) at its Cressier manufacturing hub using land around a refinery that could not be used for any other purpose due to safety requirements. Excess heat generated by the refinery was also connected to the local heating network so that the system could supply neighboring communities. Sanyal stressed the significance of brownfield efforts. “You create extraordinary loyalty amongst employees because they can see a future which is beyond what they had thought. Now they have a new dimension to their jobs and their lives.”
It is tough for customers to manage the energy transition on their own. The energy conversation had been simple for them thus far: they had one solution, and all they had to do was choose the right price. But now, as non-experts, they are forced to navigate a complex web of different forms of energies: should we electrify or use LNG, biofuels, biogas, or hydrogen?
VARO adopted a “customer lighthouse” approach to support clients in hard to abate industries, such as aviation and marine, addressing their energy security and decarbonization needs while creating a commercial advantage. By working closely with customers, VARO secured two benefits. Firstly, it helped clients by offering a range of solutions and determining the best options for their needs. Secondly, this proximity to customers ensured it did not scale up capacity ahead of demand, such that it would be at the mercy of one energy transition engine or the other. “You don’t build the value chain from the source of energy to the demand,” said Menane. “You build it the other way round, starting with the customer.”
In early 2023, VARO announced the first “customer lighthouse” with Lufthansa to supply sustainable aviation fuel (SAF) and to jointly explore the production of green hydrogen from biogenic feedstock. VARO decided to prioritize the aviation sector’s decarbonization challenge by building its capacity to supply SAF. In partnership with energy trading and logistics multinational Gunvor, VARO committed a significant investment to build a large-scale SAF manufacturing facility at Gunvor’s brownfield location in Rotterdam. This investment benefits from extensive existing infrastructure, including a transportation and pipeline network, utilities and port facilities, and proximity to key customers and markets in northern Europe. The facility would have the capacity to produce SAF equivalent to 7% of the target mandate set by the European Union for 2030.
Brownfield projects typically entail lower technological and financial risks compared to completely greenfield developments.Georges Menane, CFO
Next, VARO focused on the decarbonization of the marine and land transportation sectors. It helped to significantly reduce emissions from the Port of Rotterdam’s marine fleet by using biofuels, thereby reducing emissions by up to 90% compared to conventional diesel. Similarly, supplying the cruise ship AIDAprima with 100% bio marine fuel (BMF100) marked VARO’s first renewable fuel supply to the marine cruise sector. In 2024, the company launched VARO Renewable Diesel® (HVO100), a 100% renewable fuel reducing CO₂ emissions by up to 90%, available at 15 sites (and expanding) to support the decarbonization of land transportation.
Through these customer-centric partnerships, VARO’s objective was to build scale and create affordability. “Partnerships help us to accelerate scale,” explained Sanyal. “Scale means economies. Economies mean more commercial viability. Commercial viability means more opportunities in growing market share.”
VARO’s disciplined approach to growth manifested in its approach to M&A. The company has made close to 20 acquisitions since it was founded in 2012. Along the way, it has strived to retain the entrepreneurial soul of each target company while cautiously integrating them to drive economies of scale and secure new opportunities. There has been a consistent focus on complementarity and optimizing physical flows through its expanding network to create value. The acquisition of Preem was VARO’s largest to date, and probably the most daunting given the landmark nature of the deal. Not only did the move put VARO on the global stage, but it also set a financial precedent, as a syndicate of 30 financial institutions spanning North America, Europe, the Middle East, and Asia provided financing. VARO was confident in the future success of the Preem acquisition because of the strong complementarity between the companies. VARO’s business logic was built on maintaining a ratio of 2x or 3x in terms of the molecules it sold to those it produced. This meant that it manufactured only between 30% and 50% of the demand and secured the rest through trading. “That’s why we need both assets and trading,” said Menane. “We start from the customer, sell two to three times more than we produce, and continuously optimize the molecule depending on what our customer wants and what opportunities exist in the supply chain.”
This approach has allowed VARO to remain disciplined while creating optionality within its portfolio. Preem was primarily a producer, while VARO was more advanced on the trading side. As a result, the pairing was complementary and supportive of VARO’s business logic. There were additional complementarities, such as Preem’s market footprint and technological expertise in refining agri-waste and traditional feedstocks into a blend – an area that VARO’s Engine 1 could learn from.
The company has acknowledged that integration will require high-intensity focus. “We’ve never tackled an acquisition of this scale before, but with lessons from 20 earlier integrations, we’re focused on staying grounded: delivering today’s business while building tomorrow’s opportunity,” said Vollin. Under an Integration Management Office (IMO), a task force has been established to drive integration in areas where it makes sense and at a pace that can be effective. This has involved about 14 different work streams focusing on business, finance, and organization.
VARO is optimistic that, post-integration, the expanded entity will have the capability to influence cross-industry collaboration. For example, VARO sources its agri-waste feedstock through pragmatic commercial activity at various country levels, rather than as part of an EU-level masterplan between the agriculture and energy industries. With the combined scale of VARO and Preem (accounting for 10% of road and marine transport sector in Europe), the company has the opportunity to play a bigger role in influencing discussions and legislation in Brussels to structure and foster cross-sector collaboration.
Some companies believe the future will likely play out in one direction, say electric for mobility. Then they decide to follow their vision, formulate a strategy, and invest resources for that scenario. However, the biggest unknown is the macro context. The challenges emerging in the energy transition are manifold – changing mandates, policy shifts, and geopolitical tensions – and they need to be managed. For example, when Russia invaded Ukraine, VARO decided not to buy Russian crude or trade with Russian counterparties. Yet it had to keep its refineries operational and re-adjust feedstock flows. “Our job is not to predict the future, but to be resilient across all possible scenarios,” said Sanyal.
VARO prepared itself to engage in an energy transition that will not happen in a straight line but will follow multiple tracks. It developed different scenarios for the future and worked to select investments in ways that would make it most resilient across the largest possible number of possibilities. It might make less money in one deterministic scenario, but it would produce robust and sustainable returns across a range of others.
This pragmatic approach to capital allocation has been evident in its stance on one of its original Engine 2 pillars: green hydrogen. Building a hydrogen network requires massive investment in pipeline infrastructure across several countries. This creates an obvious cost issue: people will only consume something they can afford. Energy legislation and customer adoption are key to making hydrogen work as an alternative fuel, but both are proving to be hurdles. There isn’t a clear regulatory framework. Subsidies essential for supporting hydrogen production and adoption are not forthcoming, despite years of discussions with government authorities. Instead of sticking to a deterministic approach and sinking more resources into hydrogen, VARO’s leaders decided to recalibrate their efforts. They concluded that it would take much more time to ensure hydrogen adoption, pending the introduction of incentive schemes. “We are selecting our investments very carefully, so that we can provide a good return to our shareholders, and not to say, don’t worry, in 10 years this will work,” explained Menane. This approach is deemed essential to maintain profitability throughout its long energy transition journey.
As with any strategic transformation built on two pillars – evolving the old and building the new – there is the inherent risk of the emergence of a two-tier culture. VARO experienced initial friction between Engine 1 and Engine 2 in this classic old versus new dilemma, where everybody hoped to be part of the new adventure. Those who were part of the conventional energy business were afraid that Engine 2 would gain ground and Engine 1 would cease operations, jeopardizing their jobs.
However, the Russia-Ukraine conflict highlighted the importance of energy security and the significance of Engine 1. People soon realized that the energy transition would not be as drastic or abrupt as they feared.
For VARO’s leaders, actively managing an equilibrium between the two engines has proven vital. The goal was to progressively process 30-40% bio-waste in its refineries and decarbonize its conventional fuel value chain. This enabled employees to see that VARO’s transformation was not a ‘from-to’ scenario but a transition that related to conventional and sustainable energies, in line with customer demand.
With its strategy implementation well underway, VARO’s experiences in “dual transformation” offer meaningful insights for diverse leaders and organizations as they seek to address one of the most significant challenges of our time: supplying energy security for today while preparing for the new energy of tomorrow.
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