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Rumor mill in high gear over BP buyers

Published June 6, 2012

TEXAS CITY —┬áIt’s been more than a year since BP announced it was seeking to sell its Texas City refinery. But just who is interested in buying one of the largest refineries in the country?

One day, the rumor is Brazilian oil giant Petrobras. Then the word from inside the fence is that one of the country’s major airlines is looking to get into the refining business to control fuel costs.

After last week’s grand opening of the $10 billion expansion of the Motiva refinery in Port Arthur — now the nation’s largest — word was the partnership between Saudi Arabia Refining Inc. and Royal Dutch Shell that built the 600,000-barrel-per day refinery also was eyeing BP’s 475,000 barrel per day Texas City refinery.

All BP refinery manager Keith Casey will confirm is that the refinery is still for sale. And he acknowledges that most of the rumors about potential buyers are coming from those who work for the company.

“I know it’s feeding a lot of rumors,” Casey said. “It’s actually inside the fence that’s feeding a lot of anxiety for folks. It’s a weird place to be operating right now with a little bit of uncertainty.”

Now Valero, which already operates a 225,000-barrel-per-day refinery in Texas City, is supposedly looking at the BP refinery as an addition to its portfolio.

Valero officials would not speak directly about the rumors but acknowledge the San Antonio-based company is always looking to add to its portfolio.

“With all of the refineries that are on the market both in the U.S. and Europe, we would consider expanding our portfolio of assets but, we would be very cautious about making purchases,” said Bill Day, Valero’s executive director for media relations. “Any additions would have to immediately add value and have to come at a very good price. We have looked into many, many more things that were for sale than we have completed purchases.”

Day would not confirm if Valero officials had visited the BP Texas City site where a due diligence room is set up so interested companies can take a closer look at the refinery.

Casey said he thinks whoever decides to purchase the refinery will get a solid performer as the company emerges from regulatory restrictions placed on it connected to the 2005 explosions that killed 15 people and injured hundreds more. Still, the refinery faces several thousand lawsuits over a 40-day 2010 emissions event that has yet to go to trial.

The changes made at the refinery since the 2005 blasts should enhance the refinery’s value, Casey said.

“We think it’s a great facility,” Casey said. “It should be one of the finest. We should be able to drive this refinery up into the top third refineries in the U.S.”

Casey presented a chart that shows the refinery’s performance, as it relates to its competitors, is improving. The chart shows that in the first half of 2005, BP-Texas City was relatively close to its competitors for production.

As expected after the March 2005 fatal blasts, the competition gap widened as the refinery was shutdown for a facilitywide overhaul. As units returned to service in 2009 and when the refinery returned to full service in 2010, the performance gap with competitors shrunk considerably.

Still, Casey said, the refinery has not been profitable for several years.

That’s why the focus now is on efficiency and the ability to increase margins. A margin is the difference for what it costs BP to refine a fuel product and how much that product can be sold for on the open market.

It’s the potential of having a strong margin and again matching competitors that Casey thinks makes the Texas City refinery an appealing purchase for whomever the new owner might be.

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It’s been 16 months since BP officials announced that its Texas City refinery, one of the largest in the nation, was for sale. This is part of a series of stories taking a close look at the refinery, its history and its possible future.


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