LONDON-Oil company BP said yesterday that it has agreed to sell its refinery in Carson, California and other West Coast assets to Tesoro Corp. Tesoro is paying US$2.5 billion cash for the refinery, pipelines, storage terminals, marine terminals and about 800 Arco-branded retail outlets in southern California, Arizona and Nevada, the British company said. BP is also selling the Arco brand rights for northern California, Oregon and Washington and will lease them back from Tesoro. "This transaction is a unique opportunity for Tesoro to combine the best aspects of two West Coast refining and marketing businesses resulting in a more efficient integrated refining, marketing and logistics system," said Greg Goff, Tesoro's president and CEO. BP says it has now sold or agreed to sell assets worth US$26.5 billion since 2010. The company has a target of US$38 billion in disposals by the end of next year to help pay the costs of the Macondo well blowout in the Gulf of Mexico.
On Friday BP also announced the sale of its Sunray and Hemphill gas processing plants in Texas to Eagle Rock Energy Partners for US$227.5m. Refiner Tesoro, based in San Antonio, Texas, said the US$2.5 billion purchase price includes US$1.18 billion for the Carson refinery, which is close to its Wilmington refinery in southern California, and also the refined product inventory of the plant which was valued at US$1.3 billion yesterday.
The deal will add 266,000 barrels a day to Tesoro's existing refining capacity of 665,000 barrels a day. The Texas-based group said it would invest about US$225 million in the Carson plant in the hope of reaping annual cost savings of US$250 million. Iain Conn, head of BP's refining and marketing business, said the deal was "a significant step in the strategic refocusing of our US fuels business". California is the largest gasoline market in the US, and its drivers routinely pay some of the highest pump prices due to boutique blending requirements that prevent the state from importing large quantities of fuel. Tesoro's grip in a US-defined petroleum supply zone that includes five western states, Alaska and Hawaii would rise to 25.35 per cent from 17.66 per cent of the region's 3.12 million bpd of refining capacity with the purchase of BP's Carson refinery.
That amount would fall to 20.1 per cent if Tesoro sells its Hawaii refinery as planned. Goff expressed no regulatory concerns in a conference call with analysts on Monday. "We will work our way through the regulatory approval process," Goff said. If regulators approve the purchase, Tesoro will have three plants in California alone in addition to three refineries elsewhere in the Pacific region-in Washington, Alaska, and Hawaii. "Integrating the BP assets, specifically the logistics, is expected to drive significant value throughout our West Coast system," Goff said. BP said it was hopeful it would announce the sale of Texas City by the end of the year. It was keeping the Whiting, Cherry Point and Toledo refineries because they were less expensive to upgrade and were located closer to supplies of Canadian crude oil, it added. The deal with Tesoro includes the sale of about 800 Arco-branded petrol stations in Cailfornia, Arizona and Nevada, among other downstream assets. Shares in BP fell 0.4 per cent to 446.9p on Monday, while shares in Tesoro rose 9.6 per cent to US$38.91. As well as its list of planned disposals, BP is looking to sell its 50 per cent stake in its TNK-BP Russian joint venture, which some have valued at as much as US$30bn, following a breakdown in relations with partners AAR. AAR has expressed an interest in buying BP's share of TNK-BP, but Russian state oil company Rosneft has said it is also considering a bid. (AP)