Petrobras to sell Pasadena Refining System in Texas to Chevron
Jeff Fick / Platts
RIO DE JANEIRO
Petroleumworld 01 31 2019
Chevron has agreed to buy the Pasadena Refinery, near Houston, from Brazil's Petrobras for $350 million, Chevron said Wednesday.
"This expansion of our Gulf Coast refining system enables Chevron to process more domestic light crude, supply a portion of our retail market in Texas and Louisiana with Chevron-produced products, and realize synergies through coordination with our refinery in Pascagoula," said Pierre Breber, Chevron Downstream & Chemicals executive vice president in a press release.
The refinery runs light sweet crude only because its coker caught fire in 2011 and has not been repaired. A source familiar with the deal said it is likely that Chevron would rebuild the coker.
The assets include the refinery, pipelines connecting the refinery to crude production and major refined products pipelines, and "waterborne access to receive and ship crude oil and refined products," the release said.
The complex also includes a tank farm with 5.1 million barrels of crude and refined products storage capacity.
The sale ends Petrobras' controversial foray into the US refining sector. An ongoing corruption investigation discovered bribes, kickbacks and other malfeasance involved in the refinery's purchase that eventually led to the arrest and incarceration of Nestor Cervero, Petrobras' international director at the time of the deal.
Petrobras bought a 50% stake in the Pasadena refinery for about $350 million from Astra Oil in 2006, a massive overpay considering that Astra had paid just $42.5 million for 100% of the nearly century old plant the previous year. The deal also included a clause that granted Astra a put option to force Petrobras to buy the remaining 50% of the refinery.
Petrobras wanted to use the refinery as an entry point into the US fuels market and as a way to reduce the cost of Brazil's diesel and gasoline imports by purchasing and processing cheap landlocked US oil and shipping the refined products to Brazil. Petrobras quickly soured on the deal after the discovery of several multibillion-barrel oil discoveries in the country's subsalt region, which is expected to eventually make Brazil one of the world's top crude exporters. But the put option, which had not been disclosed to Petrobras' board at the time of the purchase, created a legal battle between Petrobras and Astra over the refinery's future.
Astra eventually took Petrobras to binding arbitration to enforce the put option, with Petrobras forced to pay Astra an additional $821 million to settle the dispute. Petrobras first put the refinery on the sales block in 2010, but the plant yielded little interest from US refiners.
Petrobras operated the refinery at a substantial loss for several years as refining margins cratered, but results improved after US shale output started to soar earlier this decade. The company also decided not to carry out a previously planned overhaul of the refinery and reduced other investments at the facility, which critics say has led to issues with accidents and emissions. Petrobras has been fined several times by Texas authorities for problems at the refinery.
The sale also underscores Petrobras' desire to reduce its role in refining, especially in Brazil. Petrobras operates about 98% of Brazil's 2.3 million b/d refining capacity, but has plans to sell off four refineries accounting for about 25% of processing capacity under a $26.9 billion divestment plan for 2019-2023.
The company is also in talks with China's CNPC to complete the Complexo Petroquimica do Rio de Janeiro, also known as Comperj. The 165,000 b/d refinery is about 85% complete, but work was halted in 2015 until Petrobras finds a partner to finish construction.
The administration of President Jair Bolsonaro, who took power January 1, wants to use Petrobras' divestment program as a way to open up Brazil's refining market to greater competition, which eventually should lead to lower prices for consumers. Bolsonaro's choice for chief executive at Petrobras, Roberto Castello Branco, was tasked with carrying out the refinery sales.
In early January, Castello Branco said that Petrobras felt "lonely" in Brazil's refined-product market and welcomed more competition.
We invite you to join us as a sponsor.
Circulated Videos, Articles, Opinions and Reports which carry your name and brand are used to target Entrepreneurs through our site, promoting your organization’s services. The opportunity is to insert in our stories pages short attention-grabbing videos, or to publish your own feature stories.
Edited by Jeff Fick; Edited by Jeff Mower from Platts / SPGlobal.
spglobal.com 01 30 2019
Hit your target - Advertise with us
PW 300.000 plus request per week
Copyright© 1999-2019 Petroleumworld or respective author or news agency. All rights reserved.
We welcome the use of Petroleumworld™ (PW) stories by anyone provided it mentions Petroleumworld.com as the source.
Other stories you have to get authorization by its authors. Internet web links to http://www.petroleumworld.com are appreciated.
Petroleumworld welcomes your feedback and comments, share your thoughts on this article, your feedback is important to us!
We invite all our readers to share with us
their views and comments about this article.
Write to firstname.lastname@example.org
By using this link, you agree to allow PW
to publish your comments on our letters page.
Any question or suggestions,
please write to: email@example.com
Best Viewed with IE 5.01+ Windows NT 4.0, '95,
'98,ME,XP, Vista, Windows 7,8,10 +/ 800x600 pixels