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The largest U.S. oil refinery closes shop


03/17/2016

Royal Dutch Shell’s marriage with Saudi Arabia’s Aramco has come to an end after almost 20 years.



In what is likely to be a significant development for the oil industry, Royal Dutch Shell and Saudi Aramco have announced plans of breaking up Motiva Enterprises LLC. This signals the end of a partnership that lasted almost two decades. With this move the control of the biggest U.S. oil refinery will be handed over to the Saudi State.

This development had been somewhat expected given their diverging interests. The two energy companies will now divide the assets in their joint venture.

Early signs of cracks in the relationship emerged last summer with Motiva’s announcement that it would independently set up its oil trading operations, distinct from Shell.

This move comes in the wake of the Saudi Government considering the selling of shares in the world’s largest oil form.

Commenting on the soundness of the joint venture, Abdulrahman Al-Wuhaib, senior vice president of downstream at Saudi Aramco, said the joint venture, created in 1998, served the partners' downstream business objectives "very well for many years."

He went on to add, "It is now time for the partners to pursue their independent downstream goals,"

A U.S. spokesman for Royal Dutch Shell said the breakup was consistent with Shell's plans to simplify its global portfolio. A strategic move by Shell.
 
Breakup plan
Both parties have said under the terms of a non-binding letter of intent, Aramco would receive the Port Arthur, Texas, refinery as well as retain its existing distribution terminals. Aramco will also receive the Motiva brand.

Currently Motiva has three refineries in the U.S. Gulf Coast region with a combined capacity of over 1.1 million barrels per day. All three refineries are located with 120-mile (195-km) radius of each another. Additionally, marketing operations support a network of around 8,300 Shell-branded gasoline stations in the Southern and Eastern United States.

Aramco will also receive an exclusive license to operate the Shell brand for the sale of gasoline and diesel in Texas along with the majority of the Mississippi Valley, the Southeast and Mid-Atlantic markets.
 
As for Shell, it will receive the refineries in Norco and Convent, Louisiana, where it has an existing chemical plant. It will further retain all Shell-branded gasoline stations in Florida, Louisiana and the Northeastern region.
 
A spokesman for Shell said the company will go ahead with Motiva’s plan and disassemble the refineries in Louisiana so that their combined output is only 500,000 barrels per day.