Aramco to pay Shell $2.2bn in break-up
Saudi Arabian Oil will pay Royal Dutch Shell $2.2bn including debt to finalise the break-up of a 19-year refining partnership known as Motiva Enterprises.
Saudi Aramco’s Saudi Refining unit will take full ownership of the Motiva Enterprises name and legal entity, including the largest refinery in the US at Port Arthur in Texas, and 24 distribution terminals, according to a joint statement. Shell will take sole ownership of the Norco and Convent refineries in Louisiana and 11 distribution terminals.
Aramco will make a $2.2bn balancing payment, split between debt and cash and subject to adjustments including working capital, Shell said in a separate statement.
Aramco will assume almost all of Motiva’s $3.2bn of net debt, including $1.5bn of Shell’s share. A cash payment will cover the balance, Shell said. The arrangement will also take the AngloDutch company closer to its target of selling $30bn of assets in the three years to 2018.
THE DEAL IS SUBJECT TO REGULATORY APPROVAL AND EXPECTED TO CLOSE IN THE SECOND QUARTER
“Motiva is a strong competitor among US refiners, and we value this important link with the dynamic US energy sector,” said Abdulaziz Al-Judaimi, senior vice-president of Aramco’s downstream business.
He said Aramco intended to “continue providing Motiva with strong financial support as it transitions into a standalone downstream affiliate”.
The transaction was subject to regulatory approval and expected to close in the second quarter, the firms said. Shell and Aramco agreed last year to end the Motiva venture, which oversaw the three oil refineries as well as fuel terminals and fuelbranding rights in the US.
US SPLIT
Under the agreement, Motiva will have the exclusive right to sell Shell-branded petrol and diesel in Georgia, North Carolina, South Carolina, Virginia, Maryland and Washington DC, as well as the eastern half of Texas and most of Florida.
Shell’s markets will be Alabama, Mississippi, Tennessee, Louisiana, a portion of the Florida panhandle and the northeastern region of the US
Motiva, formed in 1998, was a leading player in US refining with capacity to process more than 1.1-million barrels of crude a day. However, it was plagued by cost overruns and construction delays that eroded profits, Fadel Gheit, an analyst at Oppenheimer & Co, said in March 2016.
A former partner in Motiva, Chevron, exited the partnership in 2002 as part of a settlement with regulators that allowed it to acquire Texaco. Chevron’s divestment left Shell and the Saudis as 50-50 partners in the venture.