Royal Dutch Shell Plc agreed on May 24 to sell its controlling interest in a Texas refinery to partner Petróleos Mexicanos for about $596 million, the latest move by the European oil major to cut its global refining footprint.
The deal makes the Deer Park, Texas, facility the first foreign refinery that Mexico’s state-run oil company, known as Pemex, will own solely in its history. The agreement was announced not long after Mexican President Andres Manuel Lopez Obrador complained that the 28-year-old joint venture had not been good for Mexico.
Shell is shrinking its refining and chemicals portfolio as part of a broader shift by oil majors to reduce hydrocarbon emissions and shift to lower-carbon fuels.
Pemex said it plans to control and run the refinery after the deal closes late this year.
“This decision is consistent with Lopez Obrador’s strategy of refining more. However, it casts many doubts about Deer Park’s future profits, especially after seeing the margins of just cents per barrel that Pemex is getting in its domestic refineries,” said Gonzalo Monroy, a Mexico City-based oil analyst.
Lopez Obrador hailed the deal on Twitter after complaining earlier this month about how the joint venture never repatriated dividends, saying he was committed to “addressing this issue,” without providing details.
“The most important thing is that in 2023 we will be self-sufficient in gasoline and diesel,” Lopez Obrador said on Twitter. “There will be no increases in fuel prices,” he added.
The refinery can process up to 340,000 bbl/d of oil into gasoline and diesel. The joint venture was significantly revamped three years ago in a move to halve the facility's purchases of Mexican crude beginning in 2023.
The complex covers 2,300 acres outside of Houston, including an adjacent chemical plant that Shell will retain.
In 2018, Pemex agreed to renegotiate its contracts with Shell to reinvest a portion of the refinery's profits into an overhaul of the facility for processing a larger volume of crudes different that Mexico’s.
Huibert Vigeveno, Shell’s downstream director, said in a statement the company will continue working with Pemex “in an integrated way, including through our on-site chemicals facility.”
The sale price includes cash, debt and inventories, Shell said.
On May 4, Shell disclosed plans to sell its 149,000 bbl/d Puget Sound refinery in Anacortes, Washington, to U.S. refiner HollyFrontier.
Recommended Reading
E&P Highlights: Aug. 26, 2024
2024-08-26 - Here’s a roundup of the latest E&P headlines, with Ovintiv considering selling its Uinta assets and drilling operations beginning at the Anchois project offshore Morocco.
E&P Highlights: Oct. 28, 2024
2024-10-28 - Here’s a roundup of the latest E&P headlines, including a new field coming onstream and an oilfield service provider unveiling new technology.
E&P Highlights: Sept. 30, 2024
2024-09-30 - Here’s a roundup of the latest E&P headlines, including concessions awarded in the Middle East and updates following Hurricane Helene.
E&P Highlights: Oct. 14, 2024
2024-10-14 - Here’s a roundup of the latest E&P headlines, including another delay at one of the largest gas fields in the world and two major contracts in West Africa.
How Chevron’s Anchor Took on the ‘Elephant’ in the GoM’s Deepwater
2024-08-22 - First oil at Chevron's deepwater Anchor project is a major technological milestone in a wider industry effort to tap giant, ultra-high-pressure, high-temperature reservoirs in the Gulf of Mexico.
Comments
Add new comment
This conversation is moderated according to Hart Energy community rules. Please read the rules before joining the discussion. If you’re experiencing any technical problems, please contact our customer care team.