Saudi Aramco, Shell, to divide Motiva assets

OREANDA-NEWS. March 18, 2016. Saudi Arabia's state-owned Saudi Aramco and Shell will divide the assets of their refining and marketing joint venture, Motiva, in an effort to pursue independent downstream goals.

The two companies have signed a non-binding letter of intent to divide the company which was formed in 1988 and has operated as a 50:50 refining and marketing joint venture since 2002.

Under the proposal, Aramco will keep the Motiva name and assume sole ownership of the 600,000 b/d Port Arthur, Texas, refinery. Aramco can also keep 26 distribution terminals and an exclusive license to use the Shell brand for gasoline and diesel sales in Texas, the majority of the Mississippi valley, and the southeast and mid-Atlantic markets.

Shell will assume sole ownership of the 225,000 b/d Norco, Louisiana, refinery where Shell operates a chemicals plant, and the 230,000 b/d Convent, Louisiana, refinery. Shell will also assume full ownership of nine distribution terminals, and Shell-branded markets in Florida, Louisiana and the northeastern region.

The Motiva joint venture with Shell has served Aramco's downstream business objectives for many years, but "it is now time for the partners to pursue their independent downstream goals," said Aramco senior vice president of downstream Abdulrahman F. Al-Wuhaib.

The Port Arthur refinery will advance Aramco's global downstream integration strategy through supply and trading, refining and fuels marketing, chemicals and base oils, he said.

Shell said it would combine the assets from the division of Motiva with its other downstream ventures in North America "to provide simpler and more highly integrated businesses which deliver increased cash and returns," said downstream director John Abbott.

Aramco said earlier this year it is considering a public stock offering for at least part of the company in order to raise funds. Many in the industry expect the offering to involve just the company's downstream business, so breaking out the Port Arthur refinery from the Motiva joint venture would make it easier to include it in the offering.

"Sometimes in an imperfect marriage, financial troubles are the thing that pushes a couple over the line into divorce," said Amy Myers Jaffe, executive director of energy and sustainability at the Univeristy of California-Davis Institute of Transportation Studies, referring to Saudi Arabia's recent interest in international borrowing.

Motiva said in June 2015 that it would form an in-house products trading desk in 2016, following the expiration of a contract with Shell Trading US Company (Stusco). Most refiners operate their own trading and marketing operations. Motiva started to take responsibility for some of its own trading in late 2014, taking over term contracts for gasoline and diesel products.

Motiva's Port Arthur refinery in 2015 took 254,685 b/d of crude from Saudi Arabia, 59,740 b/d from Venezuela and 21,874 b/d from Mexico. It also took an average of 60,458 b/d of Canadian heavy crude via Sunoco's terminal in Nederland, Texas.

Motiva's Norco refinery processes mostly domestic crudes. The joint ventures' Convent refinery also processes mostly domestic crudes, but in 2015 it also took 36,723 b/d of Saudi crude.