NEW YORK—BP has finally found a buyer for its Texas City refinery, one of the largest and most complex in the US. The total value of the deal could reach US$2.5 billion. The refinery was the scene in 2005 of a fatal fire and explosion. Marathon Petroleum Corp will pay only US$598 million for the refinery itself and other nearby pipelines and fuel terminals. It will pay US$1.2 billion for the plant’s inventory of oil and petroleum products. Marathon may have to pay another US$700 million over six years if certain unspecified conditions are met, the company said yesterday.
BP PLC been trying to sell refining and other assets to help cover costs associated with the 2010 Deepwater Horizon explosion and oil spill. Since 2010, BP has agreed to sell US$35 billion worth of assets, and the company expects that to rise to US$38 billion by next year. The Texas City refinery has a troubled history. The 2005 explosion killed 15 workers and injured nearly 200 others. In 2009 more than 700 violations were discovered at the plant by government inspectors.
The company has paid more than US$2 billion to settle lawsuits and fines stemming from the explosion. It also has spent more than US$1 billion on safety and infrastructure improvements and another US$500 million to make fixes under a 2010 agreement with OSHA. The refinery’s size, complexity and difficult past made it difficult for BP to find buyers. That allowed Marathon to increase its refinery capacity by almost 40 per cent at a very good price, according to Fadel Gheit, an analyst at Oppenheimer & Co.
“It’s like selling a used car to a college kid. They are thrilled to have it and you are glad to get rid of it,” he said. In midday trading Monday, Marathon shares jumped 5.4 per cent to US$57.83. They rose as high as US$60.04, a record since the company was spun off from Marathon Oil last year. BP shares slipped 10 cents to US$42.05.
The refinery has been a “money pit” for BP, Gheit says. He expects Marathon to do a better job running the plant because refining is its main business. The Texas City refinery processes 451,000 barrels of oil per day. “The plant is a very different place than it was in 2005,” said Richard Bedell, Marathon’s senior vice president for refining. “BP has gone through a significant refurbishment of the plant and reconfiguration, but also has really worked to instill a safety culture in that refinery in all aspects.”
BP announced in February of 2011 its intention to cut its US refining capacity in half by the end of this year by selling the Carson refinery in Southern California and the Texas City refinery. BP agreed in August to sell the Carson refinery to Tesoro Corp for US$2.5 billion. Tesoro shares rose 10 per cent on the day that sale was announced. US refiners have been generating enormous profits in recent months because they have been able to buy US crude at prices lower than most competitors around the world. (AP)