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Western Europe: BP buys 100% of Nerefco

BP HAS stepped in to buy Chevron's 31% interest in the Nerefco refinery at Europoort, near Rotterdam in the Netherlands, giving it 100% ownership. BP said last month that it had agreed to pay about $0.9bn (excluding hydrocarbons and working capital) for the interest, which Chevron put up for sale last summer. Included in the deal are Chevron's 22.8% holding in a nearby crude storage terminal, interests in pipelines and a 31% stake in the windfarm on the refinery site.

BP's decision to buy out its partner reverses the firm's previous stance of reducing its exposure to the sector. In February, the company agreed to sell its Coryton, UK, refinery to Petroplus (PE 3/07 p39); in 2005, it sold its Grangemouth, UK, and Lavéra, France, refineries to Ineos; and in the previous year it disposed of its Singapore and Mersin, Turkey, facilities. BP says that when the Coryton sale and Nerefco acquisition are completed it will have 0.878m barrels a day (b/d) of crude distillation capacity in Europe, in seven refineries – down from 0.926m b/d in eight facilities at present.

The firm says its strategy is to focus on "advantaged" refineries, which can earn higher returns. Nerefco, with its capacity of 400,000 b/d, deep-water access, a 62,000 b/d catalytic cracker and a recent reconfiguration project to increase clean fuels production, is clearly an advantaged asset.

However, it could be more desirable in single ownership. John Manzoni, BP's head of refining and marketing, says: "As sole owners we will be able to simplify the existing operations, which were designed to meet the individual requirements of each party."

There might also be scope for rationalisation because Nerefco – created from the merger of a BP and a Texaco refinery – operates on two pipeline-linked sites. The main refinery, storage facilities and a transshipment installation are on the Beerkanaal at Europoort, while there is another storage terminal and another transshipment facility at Pernis, handling products produced at Europoort. From Pernis there are pipelines to Schiphol airport and into Germany.

BP's two recent refinery deals indicate broadly similar valuations for the capacity changing hands – although, with both deals including other assets, they are not directly comparable. The $0.9bn paid for the Nerefco interest amounts to $7.26m per 1,000 b/d of distillation while the Coryton sale, for $1.4bn, amounts to $8.14m per 1,000 b/d. Driven by high utilisation rates and high margins, refinery valuations in western Europe are at their highest for decades. However, most of the other assets for sale are smaller or less well-placed than Nerefco and Coryton.

Assets understood to be open to offers include Kuwait Petroleum's 80,000 b/d refinery at Europoort and three facilities owned by Libya's Tamoil – the 100,000 b/d refinery at Hamburg, Germany, the 90,000 b/d refinery at Cremona, Italy, and the 72,000 b/d refinery at Collombey, Switzerland. In January, Shell said it was carrying out a strategic review of its three refineries in France – Petit Couronne (140,000 b/d), Berre-l'Etang (82,000 b/d) and Reichstett-Vendenheim (78,000 b/d).

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