Shaun Polczer, CALGARY: The sale of
BP’s Texas City refinery brings the UK supermajor
closer to meeting a target of $38 billion in divestitures to
pay for the Gulf of Mexico oil spill.
The $2.5 billion sale of the ageing facility to Marathon
Petroleum brings the total raised by BP’s
divestiture programme, put in place to help it meet potential
liabilities arising from the 2010 Deepwater Horizon
disaster, to $35 billion.
Subject to regulatory and other approvals, Marathon will
purchase the 475,000 barrel per day (b/d) refinery, associated
natural gas liquids pipelines, a 1,040-megawatt cogeneration
station and four marketing terminals and associated
BP will also assign branded contracts for approximately
1,200 retail sites in Tennessee, Mississippi, Alabama and
Florida which could be supplied by the refinery. According to
BP’s Texas City refinery manager Keith Casey, the
facility does not "fit with the long-term strategic direction
of BP’s global refining portfolio".
With the purchase, Marathon becomes the fourth-largest US
refiner with 1.64 million b/d of capacity. News of the deal
sent its shares to an all-time high of more than $60 on the New
York Stock Exchange. Since going public in June 2011, when
Marathon split its upstream and downstream divisions, shares
are up nearly 50% and have doubled in the past 12 months.
"This is a unique opportunity to acquire world class
refining assets at an attractive price," Marathon chief
executive Gary Heminger told a conference call with analysts.
At a cost of $328 per barrel of capability, the acquisition
cost "is a fraction of the replacement price", he added.
Marathon will fund the purchase price with cash on hand.
Despite the seeming retreat from the Gulf Coast refining
sector, BP said it would remain a significant retailer of fuels
in the US, with approximately 8,000 BP and Arco-branded sites
in the Midwest, Pacific Northwest and along the east coast. BP
expects the deal to close by early 2013.
Together with the sale of Carson, California, refinery,
announced in August, the divestment of Texas City will allow BP
to focus its downstream investments on three northern
refineries and their associated marketing businesses, which it
describes as "feedstock advantaged".
The company is in the midst of a multi-billion dollar
modernisation effort at its 413,000 b/d Whiting refinery in
northwest Indiana. The 234,000 b/d Cherry Point refinery in
Washington state is being upgraded to produce cleaner-burning
diesel fuel. Meanwhile, the BP-Husky joint venture near Toledo,
Ohio, is investing to improve gasoline making capabilities
using oil-sands and heavy oil from their upstream partnership
Texas City produces 150,000 b/d of gasoline processed from
more than 60 different types of crude from around the globe,
including light crudes from unconventional oil plays such as
Eagle Ford and heavy oil from Venezuela and Canada. Marathon
said it would be the most complex facility in its
Since an explosion and fire on 23 March 2005, that killed 15
workers, BP said it has streamlined processes and improved
safety. The facility returned to profitability this year.
Three natural gas liquids pipelines connecting the refinery
with local suppliers are included in the sale. Subject to
applicable consents, BP will also transfer 50,000 b/d of
historical capacity on the Colonial pipeline that also supplies
However, BP’s adjacent Texas City chemicals
complex is an independent facility and is not included in the
sale. BP’s petrochemicals plant will continue to
have long-term commercial arrangements with the Texas City
refinery, the company said.
The sale provides BP with cash to pay liability claims and
penalties stemming from the 2010 Deepwater Horizon disaster.
With cash in hand, it can now focus on rebuilding its US
operations. BP remains the second-largest oil producer in the
US, employing 23,000 people.
Between 2007-2011, the company invested more than $52
billion in US capital projects, more than any other producer.
In the two years since the spill, it has paid $7 billion in
claims and the company estimates another $7.8 billion are