Saudi Aramco and Royal Dutch Shell PLC have entered a preliminary agreement to separate assets of Motiva Enterprises LLC, the Houston-based refining and marketing joint venture equally owned and operated by the companies since 2002 (OGJ Online, Feb. 13, 2002).
Aramco subsidiary Saudi Refining Inc. (SRI) and Shell’s US downstream affiliate signed a nonbinding letter of intent (LOI) to divide the assets on Mar. 16, the companies said in a joint statement.
Under the LOI’s terms, the partners have agreed to evaluate options and select an optimal deal structure in order to form a definitive agreement to divide and transfer Motiva’s assets, liabilities, and employees.
As part of the proposed agreement, SRI will retain the Motiva name, assume 100% ownership of the 600,000-b/d Port Arthur, Tex., refinery, retain 26 distribution terminals, as well as maintain an exclusive, long-term license to use the Shell brand for gasoline and diesel sales in Texas, the majority of the Mississippi Valley, the US Southeast, and US Mid-Atlantic markets.
In exchange, Shell will assume sole ownership of the 235,000-b/d Norco refinery—where subsidiary Shell Chemical LP already operates a petrochemical plant—and the 242,250-b/d Convent refinery, which Motiva previously announced will be integrated to create the Louisiana Refining System (LRS) (OGJ Online, Mar. 26, 2015).
Shell also will retain nine distribution terminals, as well as Shell-branded markets in Florida, Louisiana, and the US Northeast.
A timeframe for the conclusion of the proposed separation was not disclosed, but a further joint announcement will follow once a definitive agreement is reached, the companies said.
Dissolution of the JV comes as part of the companies’ individual strategies to pursue independent goals in the downstream sector, said Abdulrahman F. Al-Wuhaib, Aramco’s vice-president of downstream operations.
While the parties work towards definitive agreements, Motiva refineries will continue to operate as normal, said Dan Romasko, Motiva’s president and chief executive officer.
During the period of transition, shareholder financing support arrangements for Motiva remain in place, with both Aramco and Shell committed to maintaining the JV’s balance-sheet strength and liquidity, the companies said.
Aramco and Shell additionally participate in the 50-50 JV Saudi Aramco Shell Refinery Co. (Sasref), which operates a 305,000-b/d refinery in Saudi Arabia’s Jubail Industrial City.
Last year, Shell entered a deal to sell nearly all of its interest in Japanese refiner Showa Shell Sekiyu KK—another shared venture with Aramco—to Idemitsu Kosan Co. Ltd. (OGJ Online, July 30, 2015).
Under that agreement, which is due to close later this year, Idemitsu Kosan will buy Shell’s 33.24% majority interest in Showa Shell Sekiyu for about $1.4 billion, with Shell subsidiary Anglo-Saxon Petroleum Co. Ltd. to retain a 1.8% ownership interest in the venture.
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