Saudi Arabian Oil Co (Aramco) will pay Royal Dutch Shell US$2.2 billion including debt to finalise the break-up of a 19-year refining partnership known as Motiva Enterprises.
Saudi Aramco’s Saudi Refining unit will take full ownership of the Motiva Enterprises name and legal entity, including the largest refinery in the US at Port Arthur in Texas, and 24 distribution terminals, according to a joint statement dated March 6. Shell will take sole ownership of the Norco and Convent refineries in Louisiana and 11 distribution terminals, according to the statement.
Saudi Aramco will make a $2.2bn balancing payment, subject to adjustments including working capital, Shell said in a separate statement. The payment is split between debt and cash. Saudi Aramco will assume nearly all of Motiva’s $3.2bn of net debt, including $1.5bn of Shell’s share. A cash payment will cover the balance, Shell said.
“Motiva is a strong competitor among US refiners and we value this important link with the dynamic US energy sector,” Abdulaziz Al Judaimi, senior vice president of downstream at Saudi Aramco, said in the joint statement. “Our intent is to continue providing Motiva with strong financial support as it transitions into a stand-alone downstream affiliate.”
The transaction is subject to regulatory approval and expected to close in the second quarter of 2017, the companies said. Shell and Saudi Aramco agreed last year to end the Motiva venture, which oversaw the three oil refineries, as well as fuel terminals and fuel-branding rights in multiple US states.
Under the agreement, Motiva will have the exclusive right to sell Shell-branded petrol and diesel in Georgia, North Carolina, South Carolina, Virginia, Maryland and Washington, DC, as well as the eastern half of Texas and most of Florida. Shell’s markets will be Alabama, Mississippi, Tennessee, Louisiana, a portion of the Florida panhandle, and the north-eastern region of the US.
Motiva, formed in 1998, was a major player in US refining with capacity to process more than 1.1 million barrels per day of crude. It was plagued by cost overruns and construction delays that eroded profits, Fadel Gheit, an analyst at Oppenheimer & Co, said in March 2016. The 600,000 bpd Port Arthur refinery suffered leaks and fires that delayed a $10bn expansion to double the size of the plant.
A former partner in Motiva, Chevron exited the partnership in 2002 as part of a settlement with regulators that allowed it to acquire Texaco. Chevron’s divestment left Shell and the Saudis as 50-50 partners in the venture.
* Bloomberg
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